Economic Conditions Snapshot, March 2020: McKinsey Global Survey results

In McKinsey’s newest survey on economic conditions, conducted during the first week of March, the coronavirus outbreak overshadowed all other threats to the global economy. Nearly nine in ten executives identified the outbreak as a threat to global growth—more than for any other factor. Reflecting on conditions at the time, most respon­dents said that the outbreak was also a top risk to their national economies and to their companies’ growth over the next year. Since then, the public-health situation has become more dire: the World Health Organization declared the outbreak a pandemic, the global count of confirmed cases and deaths has risen, and authorities in many countries have taken emergency measures to limit the spread of the disease.

The progression of the outbreak has surely influenced executives’ views on the economy, but even the survey results from several weeks ago indicate the extent of their worries. Respondents already expected a stifled global economy in the months ahead. When asked about their home economies’ prospects, the deepest concerns came from respondents in the Asia–Pacific region—not surprising given the timing and spread of the outbreak.

Furthermore, the results show that many respondents expect their companies to change their globalization strategies and foresee new hurdles to investments. Private-sector respondents were more likely than in previous surveys to say that their companies will alter supply chains in the next few years and that the risk of an economic downturn was keeping their organizations from investing in attractive opportunities. However, a plurality of respondents continued to predict a positive near-term outlook for their companies.

Concerns over the coronavirus outbreak’s impact loom

In early March, most respondents expected the spread of the coronavirus to be one of the biggest risks to growth for the global economy, their national economies, and their organizations in the months ahead. Eighty-six percent of respondents said the outbreak is a pressing threat to global economic growth over the next year (Exhibit 1). Con­cern about the pandemic, which we first asked about in this quarter’s survey, was most pronounced in the Asia–Pacific region, where 96 percent of respondents said it was a top threat. (Exhibit 1)

Among all respondents, the coronavirus outbreak displaced trade conflicts, respondents’ chief concern throughout 2019, as the most commonly cited risk. Although trade conflicts became the third-most-cited risk overall—after the virus and geopolitical instability—they were an outsize concern in India and other developing markets. Looking at their national economies, two-thirds of all respondents said the outbreak is a top risk to growth in the next year. It was the most commonly cited threat in each region except Latin America (Exhibit 2). With all eyes focused on the spread of the virus, 4 trade-policy changes (the most-cited risk in the past three surveys) and geopolitical instability were no longer among the top five concerns. Slowing economic activity in China, the initial epicenter of the outbreak, was the second-most-cited risk. Thirty-nine percent said slowing growth in China is a top risk—the largest share since we began asking about it as a threat to domestic growth in March 2016.

Looking at their national economies, two-thirds of all respondents said the outbreak is a top risk to growth in the next year. It was the most commonly cited threat in each region except Latin America (Exhibit 2). With all eyes focused on the spread of the virus, 4 trade-policy changes (the most-cited risk in the past three surveys) and geopolitical instability were no longer among the top five concerns. Slowing economic activity in China, the initial epicenter of the outbreak, was the second-most-cited risk. Thirty-nine percent said slowing growth in China is a top risk—the largest share since we began asking about it as a threat to domestic growth in March 2016. (Exhibit 2)

Finally, the outbreak topped the list of expected threats to growth at respondents’ companies. Fifty-three percent of all respondents cited it as a risk.

Uneasy views of the global economy and conditions at home

After a more favorable turn at the end of 2019, sentiment on the state of the global economy soured in early March. Just 6 percent of all respondents said conditions improved over the past six months, while 85 percent said they had worsened (Exhibit 3). What’s more, the share reporting a substantial decline in the global economy has grown over the past six months.

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About the authors: The contributors to the development and analysis of this survey include Alan FitzGerald, a senior expert in McKinsey’s New York office; Vivien Singer, a specialist in the North American Knowledge Center; and Sven Smit, a senior partner in the Amsterdam office.