In May and June, 2020, the Federation of Korean Industries conducted a survey about the world after the pandemic, in association with the Global Business Coalition members.
Business associations from 18 major economies, standing for more than 54% of the world’s total GDP, joined the survey.
Respondents from the global business community expressed concerns over the possibility of a double-dip recession, triggered by a second wave of COVID-19 in the second half of this year. They also predicted Asia’s relative rise in face of global economic downturn.
- Post-Covid19 economic scenarios: over half (52%) of the respondents estimated a double-dip (W-shaped) scenario in which a second wave of the COVID-19 outbreak would occur in upcoming autumn and winter season, leading to a second massive economic lockdown. The global economy would have to sit still until the second half of 2022 to return to normalcy.
- Global economic growth this year: 52% of the respondents expected negative growth of at least 4%, articulating more pessimistic outlook than the IMF’s forecast of -3%. 40% of the respondents predicted that unemployment rate in their respective countries would deteriorate by over 10%p this year. Over half (56%) replied that face-to-face business activities could not resume until next year, given the current restrictions on cross-border movement and expanding no-contact economy. Only 24% anticipated free cross-border movements in the second half of this year, while almost 20% replied it is impossible to predict due to high uncertainties.
- Global Trade System: The survey respondents predicted major shifts in the existing global trade landscape in the post-COVID-19 world. Around 40% predict the North American and European economies would face severe downturn after the pandemic, while Asian countries could expect a relative surge. About 31.3% replied the world has come to an inflection point in global trade history where the traditional WTO-led system operating since 1995 is on the verge of collapse. Moreover, almost half (48%) anticipated that global trade order landscapes would increasingly become centered around regional economic blocs, eventually disempowering the WTO. About 20% foresee that discussions on shaping new multilateral governing body that could substitute/supplement WTO would soon get under way.
Many countries were striving to reduce their dependency on overseas manufacturing, leading to global supply chains being reshaped. 76% of those surveyed replied their economies would expect modest to high level reshoring effects. Consequently, changes in global value chains will become much more visible in the post-COVID-19 era.
- Post-pandemic employment: The majority (56%) ranked flexible labor market along with safety net measures as top priorities in post-COVID-19 employment policies, as they are crucial for industry restructuring. Remaining 24% replied change is needed in the labor market towards strengthening vocational training/retraining in order to cope with industrial restructuring.
More than half of respondents (52%) replied that the worldwide lay-off trend is only temporary, lasting during the lockdowns, and the employment would steadily recover when economy restarts. This is somewhat more optimistic outlook than the 20% projecting massive layoffs and consequent unemployment continuing more than a year, and 8% forecasting a full-scale transition to automation and unmanned production. Overall, the survey results revealed that the economic impact of the pandemic felt among business associations that has been constantly communicating with their member companies were severe than anticipated. In particular to Korean economy, The Federation of Korean Industry stressed that tackling lingering growth-inhibitors, improving business environment, and bringing more flexible labor market is required in order to survive Covid-19 economic distress.