As analysts peer into the near future for signs of recovery, the messages coming back are murky
By Anne-Frances Hutchinson
If there were a Magic 8-Ball Pandemic Edition, the same two responses would shake out from the inky blue: “Ask again later,” and “Your guess is as good as mine.” As experts from every corner of the globe offer prognostications about what the state of business and industry may look like in 2021 and beyond, every ounce of intelligence is underwritten by a mutating virus that has zero regard for their pronouncements.
Analysts are managing that cognitive dissonance as well as can be expected. Buoyed by the rapid development of effective vaccines, hope is the driver behind a December 2020 survey by the National Association for Business Economics. Forty-eight economic forecasters, including those from Point Loma Nazarene University and Goldman Sachs, make up the panel.
Survey chair Sally Wade noted that “NABE panelists have become more optimistic, on balance with nearly one-third revising their outlook higher based on recent news of effective vaccines.” While the NABE survey estimated economic growth at an annualized rate of 4.1% in Q3 2020 with growth slowing to 2.9% in Q1 2021, 73% of respondents expect the American economy to bounce back to pre-pandemic levels by mid-2021.
Over half of the panelists agreed that the biggest threat to the recovery remains the ultimate unknown, the pandemic. For 27%, however, the biggest risk is insufficient financial aid from the government.
NABE’s predictions assume the fast and effective distribution of the vaccine, which has proven to be a painfully unrealistic expectation. “It’s critical to remember the scale of this effort,” emergency physician Carolyn Barber reminded us in Fortune. “We are trying to deliver about 500 million doses of the vaccines, with Pfizer transporting its product (developed with Germany’s BioNTech) via dry ice thermal shippers (with remote temperature monitoring systems installed) and moving them from factories to trucks to rural areas, pharmacies, public health clinics, hospitals, and long-term-care facilities. It’s a massive undertaking, with lots of opportunity for something to go wrong.”
The impact of delays and gaps in distribution has yet to be fully explored, but with progress already significantly lagging, an extremely complex supply chain, and a host of last-mile delivery issues still unresolved, problems may push the US GDP’s recovery well into 2022.
The vagaries of distribution notwithstanding, the 2021 global economic outlook from The Economist Intelligence Unit is much less sanguine about a current mid-year recovery whether here or in the rest of the world. “In 2021 global GDP will increase by 4.5% in real terms, the fastest growth recorded since 1988. However, given the 5.2% contraction expected for 2020, (2021’s) growth will not be enough to return the global economy to pre-coronavirus levels. Indeed, we do not expect a full recovery before at least 2022, meaning that 2020 and 2021 will be lost years for growth,” they predict.
The 2021 EIU outlook offers insights into the potential future of six key industries, including automotive, energy, healthcare, and pharmaceuticals, and for this year at least, the view is a somber one. “(T)here will be nothing straightforward about the global economic and business recovery in 2021,” they warned.
There are moderately bright spots, particularly in the healthcare and pharmaceutical industries where this year’s spending levels are expected to increase by 7% and 5% respectively. “However, budgets for both public and private healthcare will be tight, and pricing pressures may force restructuring among healthcare funds, providers, and suppliers,” the EIU stressed. “New opportunities will emerge in telehealth, as well as in the production and distribution of the much-needed coronavirus vaccines.”
Global automotive manufacturers can expect double-digit growth this year because of a disastrous 2020. Overall, new passenger car sales are expected to increase by 21%, and commercial vehicle sales will rise by 16%. In China, Taiwan, Turkey, and Ukraine annual sales will be back at 2019 levels, but they’ll be the only countries where that’s bound to happen.
“The COVID-19 pandemic will force vehicle makers to review their supply chains, production plans, and sales operations. Additional risks in 2021 include renewed quarantines, an escalation of the US-China trade war and Brexit,” they posited. “The global market for new electric vehicles (EVs) will expand from a predicted 2.5m units in 2020 to 3.4m units in 2021, supported by government incentives, more stringent emissions legislation and new models.”
Digitization will open new buying opportunities. “Automakers will increasingly see online sales via their own websites as a way to regain control over pricing and over their relationship with their customers.” The pre-pandemic estimate of online new car sales is on track to double from 5% to 10%.
In the energy sector, renewables win the day as the demand for fossil fuels continues to weaken and prices decrease. “Solar and wind combined will record the strongest growth among all sources in 2021. Policy drivers, priority on the grid and lower technology costs will make renewables a more attractive investment option.”
Sudden decreases in travel brought on by bans and lockdowns contracted the oil and gas industry by 4%. “Demand for oil and gas will recover, but plentiful supplies and weak demand will keep a lid on prices. Upstream oil and gas producers will reduce dividends and cut back on operational and capital spending.”
Coal’s performance is up in the air. “Whether demand for coal returns to its 2019 level after 2021 will depend on whether growth in Asia will mitigate structural decline in the US and Europe,” they declared.
As the EIU concluded, “Even if the coronavirus is brought under control, many companies will face challenges that they will not be able to meet. Nevertheless, there will also be opportunities on offer for companies that are nimble enough to take advantage of rapid changes in the economic, business and political environment.” Even in these times, and certainly because of them, fortune will favor the bold.