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Corona Crash 2020
Why small businesses will mostly go bankrupt and how it will influence global economy.
With coronavirus being a global pandemia right now, most countries have taken measures to curb the spread of the virus by either a partial or a total lockdown. Non-essential businesses, so roughly anything outsides of groceries, pharmacies, logistics, banks, are forced to shut down for at least couple of weeks. Let’s look at potential repercussions.
In Economy after Coronavirus I’ve looked at global scale of events arguing that we’re facing a global financial crisis. However the crucial difference between now and 2008 crisis is that we’re facing a forced lockdown of small businesses and this alone will have tremendous effects.
JPMorgan Chase has evaluated that a median small business holds a cash reserve for roughly 27 days. That depends on an industry, restaurants have the lowest median with reserve for 16 days and real estate has the highest median with reserve for 47 days.
As we see from examples in China, the shortest lockdown lasted 3 weeks — the actual time of total lack of operations — with then slowly getting back to work at roughly 60% capacity. This seems like an optimistic scenario which probably is impossible to repeat in the West. More likely we’re going to face a quarantine up to…
