Canadian Manufacturing

New growth opportunities to present itself in contracting global economy: report

Cross-industry collaboration, reduced taxes, and low interest rates key to expediting recovery from the economic slump

July 29, 2020  by CM Staff

PHOTO: Frost & Sullivan

SANTA CLARA, Calif. — Frost & Sullivan’s recent analysis, New Trade and Supply Chain Mega Trends to Transform the Global Economy in 2020, predicts that the impact of the COVID-19 pandemic on the macroeconomic fundamentals will cause the global economy to contract by 3.6% in 2020.

Major European and American economies are forecast to witness contraction much deeper than 6%, whereas the Chinese economy is expected to grow by 1.3%.

The global economy will most likely begin to recover from the impact of the pandemic by 2021, boosted by hefty stimulus packages and stringent fiscal measures.

Additional efforts by governments of affected nations, such as lowered interest rates and extended loan moratoriums, are also expected to help beleaguered industries find their footing.

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“The global economy has already witnessed shallow V-shaped recovery from most historical health shocks such as SARS and MERS,” said Sambhavy Shrestha, economist, Emerging Market Innovation (EMI) practice at Frost & Sullivan, in a prepared statement. “While a wide V-shaped recovery from the COVID-19 crisis is expected, the delayed revival of global consumer demand will deter quick recovery of business sentiments and unemployment rates. As early signs of recovery in the global economy emerged by the end of Q2 2020 with easing lockdowns, historically high levels of government spending will remain pivotal for faster recovery.”

Shrestha added: “With the larger economy expected to remain contracted throughout 2020 and growth recovery to pre-crisis levels expected only in 2022, businesses need to adapt to long-term shifts in consumer spending patterns and workforce transformation. Export-oriented economies will face a severe decrease in demand and consequent reduction in government revenues, even after signs of global economic revival. Telehealth and similar minimum-contact services are well-positioned to grow in 2020, given the increased demand and government incentives for such industries.”

For further revenue opportunities, Frost & Sullivan suggests that global businesses and industries should:

  • Relocate production from China to other emerging market alternatives such as Vietnam, Thailand, and Indonesia to leverage government incentives and other strategic advantages.
  • Look for cross-industry M&A opportunities within the private sector and increase public-private partnerships to meet the vast unmet demand gap for technologically advanced solutions to transition to the new normal.
  • Offer diversified and customized price plans for their services and products that fit the needs of consumers of varying economic strata as opposed to standardized options.
  • Leverage the historically low interest rates on credits to increase investments and optimize government tax incentives to invest in new product development and supply chain realignment.