February 11, 2021
Recovery Forecasts Take Shape with Questions from Flexport’s Chief Economist
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The economic ravages of Covid-19 have been vast and profound. As countries and companies look ahead, global benchmarks can help with forecasting.
In a recent piece for The Hill, Flexport’s Chief Economist Phil Levy takes a look at factors influencing the International Monetary Fund’s global economic growth predictions for 2021.
The IMF 2020 prediction of 3.3% growth fell flat due to Covid; its retrospective estimate is -3.5%. But, this year, the financial institution predicts 5.5% growth globally and 5.1% growth in the United States.
For The Hill, Levy asks an incisive set of questions to expose possible paths to recovery in light of these forecasts. Business leaders can shape their own recovery by asking similar questions, tailored to their industry’s supply chains.
1 How will the pandemic play out? Economic recovery requires high enough immunity levels to renew trust and a sense of safety with widespread social proximity. When that occurs, business models will likely change again.
2 How coordinated is global recovery? Even if one country recovers, nearby or related markets matter. The health of supply chains depends on demand from importing countries—plus reliable suppliers and transport for goods.
3 How permanent are new patterns? This answer is probably most subject to product types. For instance, bread machines may become less popular with a return to bakeries, but home gym equipment may have staying power.
4 How much scarring will occur? While many companies can heal from economic downturn, scarification happens when businesses disappear or long-term unemployment takes hold. Economic reversal is difficult in these situations.
5 What happens to financial markets? Strong markets and low interest rates encourage optimism, growth, and lending. Falling markets and rising rates achieve the opposite.
Levy’s perspective doesn’t necessarily conflict with the IMF outlook. But, he notes just how many things have to go right in the US to achieve 5.1% growth. As these situations move forward, companies can do their best by remaining agile, informed, and inquisitive.
For more insight into forecasting in times of volatility, read 5 Steps to Gain Value from Forecasting.