The coronavirus effect on global economic sentiment

McKinsey & Company

April 2021 Update: 

 

In our latest McKinsey Global Survey on the economy,1 executives’ views are as decidedly positive as they were in March—even as the pandemic continues to dwarf other risks to growth. It’s an especially acute risk in India, where the week after the survey was in the field, the number of daily COVID-19 cases set a new world record.2

 

Globally, 73 percent of all respondents believe that conditions in the world economy will improve in the next six months. It’s the largest share to say so all year, while the share of executives expecting worsening conditions has shrunk by more than half in the past three months: 10 percent say so now, down from 23 percent in January (Exhibit 1).

So far in 2021, executives’ outlook on the global economy is increasingly rosy.
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The domestic outlook is equally upbeat and consistent across regions (Exhibit 2), even outside of Greater China3 or India—where, for eight surveys in a row, respondents were the most optimistic about their own economy’s prospects. Notably, respondents in India reported the biggest shift in sentiment since the previous survey. Though they are still more positive than not about their economy, the share expecting improved conditions in the next six months dropped from 86 percent in March to 64 percent currently.

In every region, respondents report a positive outlook on their economies’ prospects.
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As we saw in March, the COVID-19 pandemic continues to overshadow all other risks to domestic growth and now tops the list in every geography.4 The pandemic is cited as a risk by 48 percent of all respondents, while the second most common risk—unemployment—is cited by only 17 percent. It’s an especially acute concern in India, where 77 percent now cite the pandemic as a risk to domestic growth; in the previous survey, only 28 percent said the same, and unemployment was the most common risk then.

When asked about all potential risks to growth that executives foresee, there are some regional differences of note (Exhibit 3). Respondents in developed economies are more likely than their peers to cite the pandemic (65 percent, versus 55 percent), as well as asset bubbles, high levels of national debt, and supply-chain disruptions. At the same time, concerns over insufficient government support, unemployment, inflation, and weak demand are more top of mind in emerging economies.

Executives’ views on potential risks to growth vary across emerging and developed economies.
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On the company front, expectations for consumer demand continue to improve, and those for profits remain buoyant. Workforce expectations are on the rise as well, with 43 percent of respondents saying their companies’ head count will increase in the next six months. It’s the first time since the pandemic began that a plurality of respondents have said so, in a mostly steady rise since our June 2020 survey (Exhibit 4).

For the first time since the pandemic began, a plurality of respondents predict that their companies’ head counts will increase.
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This update was edited by Daniella Seiler, a senior editor in the New York office.

 

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