Out of the blue the black swan appeared. The highly recommended bestseller from Nassim Nicholas Taleb clearly describes the big impacts which highly improbable events could have. Though Taleb himself stated that the worldwide pandemic caused by the Covid-19 is not such a black swan event; the sudden worldwide shutdown of social and economic life for sure is. Governmental lockdown measures caused an abrupt halt of a long-lasting economic boom phase which seemed to be almost endless.
So, what now? And what does this in particular mean for an emerging region like South East Europe (SEE)?
My intention is not to repeat all the reports and forecasts presented to us on a daily base how big and severe the impact of the corona crisis will be. It is clear that we will be highly affected by this economic downturn. We will see severe recession with negative growth rates of even more than 10 % in 2020, also in our region in SEE. As almost all our countries are highly dependent on foreign investments, trade and tourism, the impact might be even worse and last longer than in Western European countries.
Reason to become desperate? Not at all!
Yes, we have to be aware that we will face challenging times ahead of us. We need to give full attention on crisis management to overcome the current situation. However, we should keep an eye on the post-corona times. The disruptive elements of each crisis – in particular of such a severe one – always lead to new chances, for each individual company but also for entire regions like SEE.
How could SEE benefit from the changed business environment in post-corona times?
Corona will not lead to the end of globalization; however, a fundamental rethinking takes already place. The globalization will remain, but with a backup of re-regionalization. The entire outsourcing of production and supply chains to China and other far eastern Asian countries appeared to be a big risk and weak point during this crisis. So, a lot of effort and money will be spent in Europe to spread this risk and bring at least system-relevant production (in particular in health industry) back to Europe. And this is a big chance for SEE countries with well-educated people and decent labor costs. Even in the pre-corona world the region already attracted foreign investors to outsource significant production into countries like Serbia is.
Another aspect which will enhance this repatriation of production is the circumstance that the corona crisis revealed the vulnerability of supply chains in a world of just-in-time delivery. This will also lead to closer and more production on stock again and therefore create new business opportunities (e.g. logistics industry, warehouse developers, etc.).
Therefore, it is now the time for SEE countries to get prepared for these opportunities by improving the business framework. This includes measures like deregulation, reduction of bureaucracy, investment incentives, educational measures, etc.
Summing up, handling the corona crisis will be an enormous challenge in the coming years. However, it will lead to trends in global business which will create new opportunities for businesses and economies in South Eastern Europe.
