Lockdown may be over for now, but the economic repercussions of the Covid-19 crisis have only just begun.The island suffered an economic heart attack during the month of April as the circulation of dollars that feeds livelihoods slowed to a trickle as a result of shelter-in-place measures to combat the spread of the virus.Thousands have been laid off and are surviving on unemployment benefits, while some will lose their jobs permanently, as more vulnerable businesses fold and survivors downsize.Curtis Dickinson, the finance minister, expects gross domestic product to contract by between 7.5 per cent and 12.5 per cent this year. The midpoint of the range implies an unprecedented $725 million contraction in the economy. The Government expects revenue to fall short of projections by up to $200 million. The numbers are eye-watering and the speed of the descent alarming.As restrictions on normal life continue, The Royal Gazette analyses what we have learnt so far about the economic battering meted out by the crisis and the outlook for some influential sectors. Tourism and hospitalityThe end of shelter-in-place rules will allow some industries to start earning at least a little money again, but tourism faces a longer wait, with no end in sight to the absence of flights or cruise ships.Tourism’s economic importance reaches beyond the 5.3 per cent of gross domestic product directly generated by the industry — in terms of local livelihoods and employment, the impact is far greater. As an employer, tourism directly provides 3,204 jobs, amounting to some 9 per cent of the workforce. It is a significant earner of valuable foreign currency, garnering $544 million of visitor spending, according to the Government’s 2018 Tourism Satellite Account report. Employers in the sector paid out $279 million in wages.For tourism-related businesses, the pandemic has been disastrous. Hotels stand closed and empty, most of their staff laid off. Small retailers in tourism hotspots such as Dockyard and St George’s, many of whom had stocked up for the cruise ship season, will have to rely on a trickle of local customers for months to come. For restaurants, who can reopen for takeout and kerbside pick-up only during phase one of reopening, the future looks particularly bleak for several reasons, in addition to the lack of tourists. First, it is an industry with high overheads and thin margins, leaving it especially vulnerable to a period of low or no revenue. Philip Barnett, of the Island Restaurant Group, has said that Bermuda restaurants can expect to keep about 2 per cent of their takings as profit in a good year. Second, its business model is built on two aspects of our pre-crisis life that have been severely damaged by social-distancing measures — service and socialising. Hence, restaurants invest much in staff and surroundings. Customers are prepared to pay a premium for being waited on in a convivial atmosphere with family and friends, but they may be reluctant to pay menu prices for takeout.“The restaurant industry’s challenges here and overseas are that profitability through volume is no longer attainable and as such in 2020 there is a bleak prospect even for the best-managed operations,” the restaurant division of the Chamber of Commerce said in reply to our questions.“Some restaurants will simply not survive. Some may choose to shutter for a period. Takeout helps, but is not an answer to covering overheads. Restaurants themselves will need to open, albeit accepting that volumes will be substantially reduced.”Only in phase four of the government reopening plans will restaurants once more be allowed to open their doors to diners. That may be too late for some.Looking farther out, when government restrictions no longer apply, the hospitality industry will have to contend with changes in personal behaviour. The crisis will alter the way people think about travelling, staying in hotels and dining out, not to mention that there may be many who can no longer afford to do it so frequently.The Government estimates that about $109 million, or 16.7 per cent of tourism-industry dollars, come from domestic customers. Perhaps that number could increase, if locals are put off travelling themselves and decide to redirect some of the estimated $330 million they spend on overseas trips to treating themselves closer to home — something the Premier has encouraged us to do. RetailThe retail and wholesale sector contributes about 5 per cent of the island’s GDP, more than $326 million in 2018. However, as with tourism, the statistics fail to do justice to this sector’s importance to Bermuda’s socioeconomic structure. It is a major employer of Bermudians. Of the 2,800 jobs in retail, trade and repair services, only about 300 are work-permit holders, according to government labour statistics. Last year, retailers and wholesalers paid out more than $223 million to employees.Owners are predominantly local and range from well-heeled families behind familiar high street names to the start-ups run by one person with a dream.The smaller operations are especially vulnerable to the effects of the Covid-19 crisis. Many have taken on debt to start up, committed to a lease to secure a premises and stocked up on inventory for what they hoped would be a busy spring and summer. Overheads continued during the April lockdown, but income stopped altogether. Some have worked with landlords to negotiate rent reductions or deferrals. For the hardest-hit retailers, even that has not been enough.“Some have made the decision to close their business and hand in their notice,” Penny MacIntyre, partner at Rego Sotheby’s International Realty, said. “Some have said they can only pay ‘x’ months of rent and their lease has been shortened.”While a mix of grants and loans are available for pandemic-impacted small and medium-sized businesses through a scheme operated by the Bermuda Economic Development Corporation, many will be reluctant to take on more debt when their future ability to do business normally is in doubt.As Kristen Carreiro, of ModBlu Boutique, said: “I borrowed money four years ago and am still paying it back. I don’t think it is wise, from a business perspective, to put myself further in debt.”Retailers were fragile before the crisis. Sales were already on a long downward trend, having declined year over year for 21 out of the 23 months to January this year. When an established giant such as Edmund Gibbons Company Ltd resorts to negotiating a 50 per cent cut in pay and hours with its staff because of a 90-plus per cent drop in sales, it becomes clear that Covid-19 is likely to be fatal for some smaller retailers. Stores can sell kerbside or deliver during recovery phase one. Before they can open their premises to customers in phase two, having an online presence will be key to survival. Delivery services have an opportunity to rise to the fore and if Bermudians enjoy the convenience of having purchased goods delivered to their doorstep, a new trend could start. Some bricks-and-mortar retailers may choose to reinvent themselves as online-only organisations. Real estateReal estate activities represent nearly 15 per cent of GDP. The sector directly employs fewer than 500 people, but transactions drive significant business for other sectors, such as law firms, banks, architects, builders, furnishing retailers and tradespeople.Like retail, the real estate business was having a tough time before the crisis hit. Brian Madeiros, the president of Coldwell Banker Bermuda Realty, estimated there were about 200 transactions last year, mirroring the record-low year of 2012. In 2020, he expects about 150.Sellers financially stretched by the crisis may seek to free up cash by liquidating property. Falling prices may follow, particularly as the pool of prospective buyers could be expected to shrink amid the recession.Countering this view is that realtors and banks have said for years that there is a strong pipeline of potential buyers, preapproved for mortgages and seeking to buy in favoured parts of the island, but unable to find homes at the right price. A pricing correction could provide the opportunity they have been waiting for.On the commercial side, there was a glut of space available before the crisis. Retailers who fold or go virtual could leave more empty units, particularly if landlords do not give some ground to help them survive the crisis.With regard to office space, the only sure thing is that big changes are afoot. The biggest work-from-home experiment in history may have encouraged many firms to re-evaluate their need for space. Physical-distance requirements will necessitate reconfigurations for some and open-plan spaces, designed to encourage collaboration, may have to be rethought. Landlords will need to be flexible to help tenants adjust to the “new normal”.International businessInternational business is the driver of the Bermuda economy, directly generating more than one quarter of the island’s GDP and indirectly, probably as much again. Labour statistics show it is a great employer, with two thirds of its 3,985 employees Bermudians, spouses of Bermudians or permanent resident’s certificate holders. Last year, it paid out $1.2 billion in employee compensation, more than one third of Bermuda’s total pay. The business services sector, another major employer, derives much of its work from international business.Fortunately for Bermuda, its main economic engine seems to be running well through the crisis. The flagship re/insurance industry, despite its tradition as a relationships business, has adapted to working remotely. Japanese April 1 reinsurance contract renewals were completed largely remotely, said John Huff, the chief executive of the Association of Bermuda Insurers and Reinsurers, and the Florida June 1 renewals are being done virtually as well.Insurers, however, are not immune from the economic pain being suffered by their customers. The 20 per cent pay cut taken by most Aon staff may be a sign of things to come. Event-cancellation claims will run into billions, while business-interruption claims could become a devastating exposure if some US states follow through with proposals to force insurers to pay out for coronavirus-related losses by effectively changing the terms of policies retroactively. However, industry expert Robert Hartwig believes insurers would have a strong constitutional argument against it to take to court.Bermuda will need to be ready for cut-throat competition from rival jurisdictions in the wake of the crisis. Recession and mass unemployment will persuade others to lower barriers to foreign investors and workers as they try to resuscitate their stricken economies. The island will have to adjust its own barriers to compete and to attract new companies to replace some of what we lost. Fortunately, the Government has a game plan on hand in the form of the BermudaFirst recommendations, which may just get accelerated into policy out of competitive necessity.EmploymentBetween 8,000 and 9,000 people have received unemployment benefits over the past month, about one quarter of Bermuda’s workforce. The hope was always that most of the laid-off workers would be rehired within 12 weeks — the planned duration of the benefits scheme. How many will permanently lose their jobs will depend on how fast the economy can bounce back. Under the Employment Act, layoffs automatically become redundancies after four months. It seems likely that some restaurants, retailers and tourism-related businesses will not survive and many jobs will disappear with them. While this crisis is unlike others in our lifetimes, one aspect is familiar: that those at the bottom end of the income ladder are being hit the hardest. Most lower-paid workers are in jobs that cannot be done remotely and so their livelihoods are at greatest risk. Inequality will worsen. Demands will grow for a new welfare policy, building new safety nets for the most vulnerable — as already proposed by Jason Hayward, the Progressive Labour Party backbencher.Among those who lose their jobs will be some of the 8,000 or so work-permit holders on the island. Their departure will be nothing to cheer, as the Government will have fewer taxpayers, and surviving businesses fewer consumers to sell to.When the Covid-19 fallout finally settles, it seems that pre-crisis concerns about the economic effects of an ageing and declining population will be more acute than ever.