Gulf News spoke to Julius Baer, the Swiss Wealth Manager, on the world after the corona crisis. All in all, the general trend is that the crisis accelerates existing structural trends rather than creating new ones. The world will nevertheless look different, but neither as much as we hope nor as much as we fear.
Making healthcare resilient
Dr. Damien Ng, Thematic Analyst
The coronavirus crisis accelerates existing structural trends rather than creating new ones. It should also have long lasting impacts on economics, politics, globalisation, society, healthcare, governments to name a few. Let’s take a closer look at healthcare – because it is most topical. The biggest issue with healthcare is that costs have been rising rapidly for years, primarily in the developed countries but also in developing countries. Between 1980 and 2019, the share of healthcare costs of global GDP has risen from around 5 per cent to 9 per cent. Put differently, people spend more and more money on healthcare, which they cannot spend on other things anymore. However, we believe that thanks to technological progress, we are at a point where we can make the system more robust and more efficient while at the same time providing high-quality care. Telemedicine is one of the most important tools in this regard, but likewise artificial intelligence, e.g. when it comes to diagnostics. Also within healthcare, we have been talking about progress in genomics for quite some time, driven by rapidly falling genome-sequencing costs. This could lead to tailor made treatments – based on a patient’s unique genetic code, resulting in a shift from value-based to volume-based care and likewise leading to greater efficiency.
Thanks to technological progress, we are at a point where we can make the system more robust and more efficient while at the same time providing high-quality care.
The pandemic has also demonstrated the willingness of many nations to turn to innovative solutions to alleviate strain on their healthcare systems while ensuring that patients continue to receive quality medical care during the public health emergency.
Global support for the greater use of digital data in healthcare is primarily driven by the younger cohort of medical professionals and consumers, which bodes well for the future resilience of the system. Also younger people are more likely to view the further digitalisation of healthcare as a means to improve patients’ health out-comes and experiences. This development is fostered by favourable political tailwinds, momentous demographic forces, the rise of chronic diseases associated with ageing, the growing financial burden of medical care, as well as shifting preferences for convenience and greater digital uptake.
The rediscovered role of governments
Norbert Ruecker, Head of Economics and Next Generation Research
One of the important aspects this pandemic has taught us is that: governance matters, governance that fits the nuances of cultural differences. We have seen that countries with solid governance ratings, from a so-called ESG perspective, tended to weather the crisis well. Harsh lockdowns were the consequence of unpreparedness, uncertainty and the deficiencies related to the aspects mentioned above. The crisis exposed dormant issues and likely widened existing rifts in terms of social cohesion, in which political symptoms such as populism have their roots. The crisis also accelerated authoritarian tendencies where they existed before, and in that sense made the world less democratic. However, the crisis was a catalyst mainly for domestic politics, but not for geo-politics. Dismissing earlier fears, the confrontation between China and the US did not escalate. That said, the multi-polar world is thriving and will remain a source of surprise this decade, not least as China regained economic strength exceptionally fast.
One of the important aspects this pandemic has taught us is that: governance matters, governance that fits the nuances of cultural differences.
One of the important aspects this pandemic has taught us is that : governance matters, governance that fits the nuances of cultural differences. We have seen that countries with solid governance ratings, from a so-called ESG perspective, tended to weather the crisis well. Harsh lockdowns were the consequence of unpreparedness, uncertainty and the deficiencies related to the aspects mentioned above. The crisis exposed dormant issues and likely widened existing rifts in terms of social cohesion, in which political symptoms such as populism have their roots. The crisis also accelerated authoritarian tendencies where they existed before, and in that sense made the world less democratic. However, the crisis was a catalyst mainly for domestic politics, but not for geo-politics. Dismissing earlier fears, the confrontation between China and the US did not escalate. That said, the multipolar world is thriving and will remain a source of surprise this decade, not least as China regained economic strength exceptionally fast.
A new way of living and working
Carsten Menke, Head of Next Generation Research
The corona crisis has temporarily turned our cities into sleeping giants, prompting some to raise the question if our city-centric world has reached a tipping point. Seemingly supportive of this, there are reports of people fleeing from cities. However, taking a closer look, these reports rather refer to a shift from the world’s biggest cities into smaller ones. While some will doubt life in the city because of the current crisis, we do not find any evidence that the density of cities raises the risk of being infected with the coronavirus. This becomes most obvious by looking at the persistently low infection numbers in some of Asia’s megacities. Instead, the past months have shown that the infection risk is first and foremost about our own behaviour.
It is very interesting to see how some cities are trying to keep what they established during the crisis; more room for pedestrians and cyclists for example, and the greater relevance of small-scale neighbourhood societies.
The crisis will however leave an impact on society. It is very interesting to see how some cities are trying to keep what they established during the crisis; more room for pedestrians and cyclists for example, and the greater relevance of small-scale neighbourhood societies. Hopefully, these elements will remain as they have the potential to make our cities more liveable. When it comes to the way we work, we reiterate our view that working from home will be more common, but it will not be the new normal. It provides greater flexibility but has the disadvantage that the interaction with our colleagues is suffering. Not to mention the fact that it deprives the day of structure, which is a problem for many.
With that in mind, we expect the world’s cities to bounce back, as they did after every crisis, and remain the growth engines of the global economy.
Accelerated revolution in electric mobility
Norbert Ruecker, Head of Economics and Next Generation Research
Energy transition as an example of a structural trend that is positively impacted by the crisis, in particular, the shift towards plug-in cars away from combustion engines. Various countries pledged to aim for net-zero greenhouse gas emissions by 2050 or 2060, with China being the most surprising new joiner. The crisis offered an opportunity to tilt policy support towards environmental goals.
The year 2020 would have been anyhow pivotal for electric mobility. Automakers had prepared many new model launches, mainly to comply with tightened emission regulation in Europe. The crisis fast-forwarded the shift towards plug-in cars thanks to stimulus measures including dedicated support to cleaner mobility, most notably in Europe and China. The outcome was astonishing. Plug-ins now account for more than 20 per cent of new cars in Europe, and 10 per cent in China. With the new government, the United States will likely move in a similar direction. More importantly, some automakers are showing a credible journey towards offering economic, long-range and clean electric vehicles before 2030. The developments so far this year, confirm our view that the era of electric mobility is about to take off this decade. We pulled forward our long-term projections for plug-in market shares. In consequence, with mobility representing the lion’s share of oil demand, we also see a peak in global oil demand as very likely around 2030. Both the auto and oil business face more violent, tectonic shifts, and both the opportunities for the agile, focused leaders and the threats for the distracted, half-heartedly committed laggards have grown.
Sustainable investing to gain traction
Susan Joho, Research Analyst
The sustainable investment wave continued to gain momentum over the course of 2020, as the corona crisis raised awareness of severe market shocks. Next to fortifying the need to tackle climate change, which also bears the risk of repeated severe shocks in the nearer future, it also brought to the fore the importance of social issues, supporting the rising inflows into sustainable investments throughout the pandemic.
While the hardship of the crisis itself also brought a temporary demotion of environmental, social and governance (ESG) issues to many stressed companies for this year, investor interest nevertheless kept rising, according to the most recent Edelman Trust Barometer.
Industries with a link to sustainability like healthcare, education or renewable energy are seen as growth drivers of the future, thereby attracting more and more inflows.
Over the summer, the investment segment gained further market share, with both the total of green bonds ever issued and money invested in sustainable funds surpassing the $1 trillion hurdle. Rising regulation and governmental policies, especially in Europe but increasingly also in Asia, help to boost this trend.
Next to growing product opportunities, sustainable equities and their respective benchmark indices continued to outperform. Industries with a link to sustainability like healthcare, education or renewable energy are seen as growth drivers of the future, there-by attracting more and more inflows. Moreover, research has shown that companies with a strong ESG background are more resilient and successful in the long run.
