McKinsey & Company Global Economic Survey Report
A recent report authored by McKinsey & Company provides a detailed look at the extent of the damage caused by the COVID-19 pandemic. There is certainly relative optimism about the future, but risks to that optimism continue to emerge. The threat of a renewed coronavirus outbreak remains the most pressing threat both globally and domestically. An additional risk factor is the recent social unrest that has been gaining prominence. This risk is not only a U.S. problem but is a high risk factor globally as well. Unemployment is also a growing concern. Over half of the executives surveyed in this report expect unemployment to increase over the course of the year.
How companies are responding
As we all know, the damaging effects of the pandemic have been far-reaching. In fact, only 12% of the respondents indicated that their business has not been affected by COVID. Even more telling, only 11% of the executives surveyed said that their companies are fully operational at pre-covid levels. Finally, a much smaller workforce will emerge as economies recover. One-third of the respondents reported that the size of their workforce will decline between now and the end of the year. This number is also the highest ever reported since April 2009.
When asked about the timeline to return to “normal,” there was a great deal of variation on the answers. A little more than a third of respondents said that their companies would be fully operational before the end of this year. An additional one third indicated that it would take them until 2021. When considering the breakdown by key industries, the automotive and assembly executives were the most optimistic about a return to business. Travel, transport and logistics were much more pessimistic and could not forecast a full return until next year. Companies in the energy sector were the handful of respondents who indicated that they are already operational and their business activities have not decreased since the pandemic began.
What changes will companies make?
When asked about the changes that will come as a result of COVID, some of the most commonly cited changes included more remote and/or virtual work, a continued shift towards adopting business technologies and a move towards all-things-digital. Many companies also report that they will be forced to make decisions regarding consolidating or closing some operations, reconsider their geographic footprint and reposition the location(s) of their supply chains. The biggest risk inherent in these shifts is ongoing weak consumer demand however, respondents overwhelmingly believe that demand will increase going forward rather than decrease.
Only time will tell how quickly and successfully the global economy recovers from this pandemic. But, an optimistic but cautious outlook will go a long way in a return to the “new normal” that awaits us.
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