Global economy is looking up – new McKinsey global survey

…69% say global conditions to improve

…Three-quarters of executives see improved in 6 months

…Despite overall optimism, Covid-19 still looms largest as risk to economic growth in respondents’ countries

Ben Eguzozie, in Port Harcourt

A new report based on a survey by McKinsey on coronavirus effect on global economic sentiment, said, the world’s economy is looking up again.

“The latest findings signal greater optimism about the economy and corporate prospects than there has been since COVID-19 was declared a global pandemic a year ago. But risks remain, beyond the pandemic itself, including both unemployment and weak demand,” McKinsey said.

According to the American worldwide management consulting firm, while the global economic outlook has wavered in recent months, respondents are more optimistic now about the world economy’s prospects than they’ve been at any other point during the crisis.

McKinsey said 69 per cent believe global economic conditions will improve, up from 56 per cent in the previous survey. When asked about their countries’ economies, nearly three-quarters of executives expect improved conditions in the next six months, up from 56 per cent in January—the highest share to say so since the pandemic began, and since we began asking the question in February 2004.

In every region but Latin America, where executives are still more optimistic than pessimistic, a majority of respondents expect improvements in the months ahead.

The survey also said that executives (of countries, companies) see positive momentum building in the economy. But the pandemic still persists as an outsize risk to growth, the report added.

It said, unemployment concerns also seem to be subsiding, compared with the past few months when pluralities or outright majorities of respondents predicted an increasing unemployment rate at home.

“Now, 43 per cent of respondents expect a decline while 38 percent expect an increase, though there are notable differences by region. A majority of respondents in Europe still anticipate rising unemployment (which was true in the past two surveys), while those in North America are the most likely of their peers to expect a decrease in unemployment: 69 per cent say so, while only 16 per cent in the region predict an increase,” the McKinsey survey said.

At the company level, positive expectations are also hitting new highs as 63 per cent of executives believe that demand for their companies’ products and services will increase in the months ahead, versus 39 per cent who said the same one year ago, while 65 per cent expect their companies’ profits will increase—the largest share to say so in three years.

McKinsey also said, workforce expectations remain stable, with a plurality of respondents saying their head counts will stay the same as they have throughout the pandemic. Thirty-seven per cent, however, expect their workforce size to increase—the largest share to say so since before the pandemic.

Meanwhile, despite the overall optimism, the COVID-19 pandemic still looms largest as a risk to economic growth in respondents’ countries. The pandemic is cited most often, followed by unemployment and domestic political conflicts, and is the most common risk in every region but Latin America and India. As in the previous survey, executives in Latin America and in Europe cite unemployment more often than their peers—and this month are followed closely by those in India—although the shares saying so have fallen since January, McKinsey said.

The American worldwide management consulting firm said, for respondents’ own companies, weak demand remains the greatest threat to growth, though increasing industry competition has risen in the ranks. “Across sectors, respondents in consumer packaged goods and retail are the most likely among their peers to say so: 41 per cent cite it as a risk to company growth, versus 28 percent of those in all other industries,” McKinsey said.