Europe is slowly easing its lockdowns – will this be a gradual return to normal, or path to abnormal for exporters to deal with?
Europe has been hugely impacted by COVID 19, seemingly bearing the brunt of both the human and economic effects. The situation in the USA may get worse, and the future of emerging markets in countries such as Brazil or India is unknown, but when human life is lost in the thousands, and economic damage is measured in the trillions, quantifying relative harm is somewhat pointless. Throughout Europe, communities and families have suffered, but while the massive disruption placed on businesses, organisations, and economies of European countries has been immense, it has not been universal across the Union.
Some nations, such as Germany, are managing both the human and economic fallout better, and other European countries, such as Italy, are breaking under the strain.
While German business confidence is down to its lowest level since the 2008 global financial crisis, and a recession almost certain, there are predictions that the economic decline in Germany could be mitigated by almost half what it may have been if not for the roll out of the country’s ‘short-time’ wages compensation scheme, which is similar to New Zealand’s wage subsidy grant (this has been implemented before by the state, most recently in the 2008 financial crisis). The IFO Institute predicts that the key industries that will be impacted by lower demand, and will utilise the compensation scheme, will be automotive (41%), mechanical engineering (33%) and electrical engineering (32%) – the heavyweight’s of Germany’s economy.
Being one of the early epicenters of C19, Italy is one of the nations most affected. ISTAT reported a significant decrease in external trade in February and one of the steepest recorded drops in consumer and business confidence in March. Noting that the Government’s containment measures had suspended an estimated 34% of total economic production in Italy, ISTAT projected that these measures would contribute to a 4.1% drop in Italy’s annual economic consumption if maintained until the end of April, rising to 9.9% of annual economic consumption if they remained in place until the end of June. Income and employment figures are expected to suffer significantly more than almost anywhere else in Europe. Despite this, NZTE suggests there may be a potential opportunity in Italy – while Italy’s fashion industry has experienced a downturn in light of C19, it will also be ready to re-start at a faster pace coming out of it, creating a demand for suppliers to be prepared to innovate with them. There is potential for New Zealand’s reputation for quality and sustainability to become more valuable in this space.
There are serious pressures coming to bear on all businesses in the European region, from all quarters; demand, supply, logistics, labour, capital :
In response to agricultural labour issues with increased demand in food production, legislation has been passed that will allow foreign seasonal workers already in the country to work for longer periods under their visas, and facilitate labour ‘leasing’ from businesses outside the agricultural sector, and allow workers receiving wage subsidies and pensioners to accept temporary jobs on farms.
The German Government’s economic stimulus package involves the following:
Further support and a supplementary budget worth up to €600 billion was announced by the Bundestag in the last week. This includes:
Italian government’s ‘Cure Italy’ decree involves:
Airfreight options through NZTE:
View the Flight Availability section on the NZTE website, or contact firstname.lastname@example.org. This is being updated daily with current airfreight capacity and option to a number of international destinations, including within Europe, as well as contact details for the relevant freight forwarder. In the first instance, exporters should contact their preferred freight forwarder, who will be working collaboratively within the industry to find the best options available.
European markets are still currently dealing with C19 rather than recovering from it. Despite Germany being positioned better than neighbours such as Italy going into this crisis, and through it, this country will still suffer a serious recession this year, somewhere between -1.5% and -11% reduction in GDP is predicted over the next 12 months.
A stark illustration – NZTE cited a French National Statistics Institute (INSEE) study analysing the French economy, which indicates that 35% of the manufacturing and service sector in that country is already considered ‘lost’.
It is also important to note that many European states are responding in different ways to C19, and even when undertaking similar approaches, outcomes can be significantly different state by state. There is very little to be certain on, and forecast with accuracy, when it comes to the EU, the sum and its parts.
We will leave it to the WHO to provide more opaqueness on the already murky outlook. With the EU, WHO recently stated that on one hand there are reasons for optimism, and on the other they are very concerned. This is due to distinct data and outcome disparities across the Bloc. Some EU countries with community transmission are starting to show signs of a decline in the rate of increase in new cases, following the combination of public health and clinical interventions put in place, while other countries are experiencing a rapid increase in cases or a fresh surge.
Disparity in outcomes, Disparity in data. Disparity in advice. Disparity of outlooks. Just another Tuesday then.
C19’s impacts will linger in the EU for years to come, longer than most other regions due to the severity of the impact, and New Zealand exporter’s need to prepare for this. They will need to change now the way they approach their partners in the market, modify their articulation of value to fit, and adjust to what opportunities are hidden at the moment, but that will present themselves soon.
If any of these aspects – on partner, channel or market triage assessment – are whirling around in your head, contact us on how we can help to provide clarity, with the time we have now to understand and plan in the best way. Don’t hesitate to email email@example.com or click here
NZTE Europe – https://covid19.nzte.govt.nz/page/uk-and-europe
NZTE Germany – https://covid19.nzte.govt.nz/page/germany
NZTE Italy – https://covid19.nzte.govt.nz/page/italy
IFO Institute (Germany) – https://www.ifo.de/en/node/53961
Italy Govt. stats – https://www.istat.it/en/