Global recovery ‘running out of steam’

(The Philippine Star), 8 Nov 2020

MANILA, Philippines — Businesses worldwide believe the current pace of global economic recovery may not be sustained in the short term due to repeated pandemic waves, results of a survey conducted by Oxford Economics showed.

The fourth quarter Global Risk Survey conducted by the UK-based think tank showed respondents, which included some of the world’s largest companies, expecting the pace of initial recovery to be followed by either subdued growth or a sharp weakening as several countries reimpose lockdowns in an effort to contain the second wave of the pandemic.

“Businesses are worried that the nascent economic recovery is already running out of steam,” the firm said.

The survey was completed online by 142 businesses, primarily Oxford Economics clients, scattered worldwide, with the largest representation in Europe, North America and Asia Pacific.

A quarter of the respondents identified their operations as multinational in nature.

The three largest sectors by number of respondents were financial institutions, industrial manufacturing and materials, and real estate finance and infrastructure.

These companies employ around six million workers worldwide.

In the latest survey, further signs of pessimism over the outlook for the global economy was seen among firms. More than a third of businesses reported that they had become slightly more negative over the next two years.

Respondents also remain cautious over the pace of recovery in 2021, coming from strong expectations of a full-year contraction this year.

Majority of the respondents anticipate a U-shaped recovery characterized by several quarters of subdued economic output before realizing a firm recovery.

“A return to lockdowns is the dominant near-term concern. Businesses see near-term risks to global growth as stemming primarily for a renewed wave of infections and the associated re-imposition of public health measures,” said Oxford Economics.

Respondents also flagged risks arising from possible failure of fiscal policies to support recovery, threat of a global financial crisis as recession deepens, as well as re-escalation of trade tensions.

Among the medium-term fears, meanwhile, include dangers associated with climate change as well as structural weaknesses in economies in the aftermath of the crisis.

Several developments, however, can be tailwinds to global economic recovery, foremost among which is the successful development of vaccines against COVID-9 which would allow for a more rapid return to normalcy.

Further loosening of monetary policy worldwide can also trigger a more robust recovery, according to respondents, as well as additional fiscal support in the United States.