Will the pandemic spur deglobalisation?

The second part of a new series by the Ninety One Investment Institute

Self-filmed at home by our authors, during the Great Shutdown.

The fast view:

• The longer the pandemic and the economic crisis it has spurned lasts, the greater the chance it sends the globalisation that began after the Second World War into reverse.
• Yet the type globalisation that characterised the 1990s and 2000s was already receding before this crisis. In its place regionalisation was leading—a variant of globalisation but not in and of itself deglobalisation.
• Our base case is a continuation of that regionalisation trend. A self-reinforcing process of deglobalisation is still possible, but we consider this a risk case. Meanwhile, COVID-19 also poses an upside risk to globalisation given the extraordinary positive impulse to digital services trade.
• There is a temptation to draw simple conclusions from COVID-19. For instance, a self-reinforcing deglobalisation that prompts an increased risk of higher inflation. Assessing the ways in which globalisation affects inflation, we think there may be an upward bias to inflation in longer-term timeframes, but in the context of a disinflationary impulse in the short to medium-term, and our base case of continuing regionalisation, COVID-19 is unlikely to lead to precipitously higher inflation.

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