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BUSINESS

Executives anticipate multi-year

recovery is most likely scenario

CHINA IS BANKING ON A FAST, FORCEFUL RESPONSE TO THE COVID-19 OUTBREAK, LOOKING FOR A
V-SHAPED REBOUND AFTER THE 7% WALLOP TO ITS GDP IN THE FIRST QUARTER OF THE YEAR. THE
TRAJECTORY IS AMONG NINE ECONOMIC RECOVERY SCENARIOS MCKINSEY & COMPANY PRESENTED
TO MORE THAN 2,000 EXECUTIVES WORLDWIDE IN A RECENT SURVEY SEEKING THEIR VIEWS ON THE
LIKELIHOOD OF EACH. HERE WE LOOK AT THE RESULTS, WITH HINTS OF THE FUTURE FOR THE UK

usiness leaders have coalesced in opinion SCENARIOS FOR THE ECONOMIC IMPACT OF THE COVID-19 CRISIS
around two likely economic recovery scenarios:
a full restoration of global GDP growth that
Bcould materialise this year or into next year, or a
two- to three-year recovering following the initial economic
tsunami. The strongest body of opinion among the 2000
executives worldwide surveyed by McKinsey was around
the multi-year recovery. Notably, they found the recovery
that China is attempting – a V-shaped bounce-back after
the 7% hit to its GDP in the first quarter of the year – the
least likely outcome.
McKinsey presented nine scenarios, built on estimates
of three likely paths for the spread of the virus and the
public-health response, and three potential levels of
effectiveness for governmental economic response. Out of
the nine scenarios describing the economic impact of the
crisis and the recovery period, the clearest survey result
was the respondent preference for the scenario defined by
a (regional) recurrence of the virus after containment, a
muted recovery, and slower long-term growth.
According to Sven Smit, an Amsterdam-based senior
partner with McKinsey and global leader of the McKinsey
Global Institute and global Covid-19 response team, the
business leaders coalesced around two – a full restoration
of global GDP growth that could materialise this year or
extend into next, or a two- to three-year recovery following
the initial economic tsunami.

Impact scenarios
Looking at the table, the shaded scenarios, labelled A1 to
A4, reflect those outcomes in which both the public-
health and economic-policy responses are adequate or
better. The B1 to B5 scenarios reflect outcomes in which
the responses are ineffective in one or both domains
(public health and economic policy).
Respondents were asked to rank three scenarios in
order of likelihood. The scenario they thought most likely,
A1, suggests that respondents see interventions in both responses as the significant failing in this crisis; 14% chose hold balanced views regarding possible outcomes,
the public-health and economic-policy dimensions as scenarios emphasising the failure of public-health expressing anxiety toward possibly worse recovery paths.
partially effective, and that the return to pre-outbreak interventions. Another notable result is that respondents The dual imperative of safeguarding lives and
levels for GDP, income, and corporate earnings will take from China, which moved through the crisis first, expressed livelihoods is a challenge to the world to combat the virus
time. After A1, the most prevalent choice was A3, a more positive views, with 28% (as opposed to 12%) and ensure that people can get safely back to work as
stronger scenario in which the virus is contained and the choosing the scenarios projecting the strongest growth soon as possible. The world is now embracing this
pace of economic growth slowly recovers toward pre- rebound (A2 and A4). Respondents from Europe, the US challenge. Governments and many private organisations
outbreak norms. and Asia–Pacific strongly favoured A1 as their most likely are rapidly developing innovative public-health responses
Altogether, 59% of respondents selected more scenario, reflecting the general sober assessment of both to fight the virus and help those affected.
optimistic A scenarios as their lead choice, and 41% chose viral containment and economic recovery. McKinsey will continue to report on the survey, with
B scenarios. Of the executive respondents selecting B None of these scenarios is good news, however. All of more depth and data by scenario. The results form a
scenarios as their lead choice, 29% chose scenarios in the them describe a global health and economic crisis of baseline against which to follow and evaluate
first column, suggesting ineffective economic-policy proportions not seen since World War II. Most executives perceptions of the crisis around the world.

8 INDUSTRIAL TECHNOLOGY • May/June 2020