Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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The socio-economic impact of COVID-19 is unprecedented for the modern age. Despite new vaccines, economies around the world are left pondering about the pace of recovery.  Compared with the synchronized nature of the global economic slowdown in the first half of 2020, the global economy showed signs of a two-track recovery in the third quarter of 2020: Developed economies experiencing a nascent recovery and developing economies lagging behind. A resurgence in infectious cases in Europe, the United States, and various developing economies since September led to renewed calls for lockdowns and curfews.  The aforementioned factors threatened to weaken or delay a sustained global economic recovery into at least the first or second quarters of 2021.

A recent survey by McKinsey&Company sheds light on the global economic sentiment. Many executives expect that the conditions in the global economies and their respective national economies shall get better over the next two quarters. However, compared to December, the number of respondents who feel that the economic conditions shall improve has reduced.

Regionally, respondents from India are on par with China when it comes to being positive about the economic future in their respective countries. Many Indian respondents are rather upbeat about the global economic prospects. In stark contrast, the sentiment has become more negative in many other regions: Since December, in Europe and Asia-Pacific, the number of executives that expected their respective national economies  to get better reduced by 11 and 15 percentage points respectively. The most acute decline in positive sentiment was seen in the Latin-America region, where the number of respondents who expected economic recovery reduced from 56 to 30 percent, since the last survey.

Why has the positive sentiment declined in some regions?

As many countries implemented a lockdown and other measures to contain the virus, a widespread economic slowdown occurred in the first half of 2020. However, a second wave, where the number of infectious cases in Europe, US, and Latin America increased, meant that the economic recovery in those regions was delayed. 

According to the McKinsey survey, In Europe and Latin America, respondents were noted to place more emphasis on unemployment than other regions: The respondents in these regions highlighted that unemployment was the biggest deterrent to growth, even more than the pandemic.

The survey also revealed that many respondents feel that the measures taken by their respective countries may not be enough to contain the virus’s health impact.  Further, the number of respondents, who expect rising demand and profits for their own companies has reduced significantly from December.

Ground realities

As per a BBC report,  the stock markets worldover have also been recovering since the inception of the pandemic: Major US and Asian stock markets have seen a recovery since the first vaccine was announced sometime in November. Interest rates have been by central banks of many nations in a bid to encourage borrowing and consequently demand via spending. However, fears of more lockdowns and delays in vaccination drives have kept economic sentiments grounded, as per analysts.

The services sector has been the most affected by the pandemic due to the need for social distancing. Deloitte highlights that the manufacturing sector across the world is expanding at a relatively good pace, due to a robust demand for goods that do not require social distancing. Conversely, the transportation services, retailing, and hospitality service sectors have been impacted by social distancing measures. 

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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