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Inflation, geopolitical flux top threats to global growth: Survey

Inflation and geopolitical instability were cited as top threats to economic growth by respondents in a March McKinsey global survey on economic conditions. The COVID-19 pandemic has all but disappeared as a perceived source of macroeconomic risk.

Even respondents in Greater China, who have reported outsize concerns about the pandemic’s economic effects, rate it as a much lower risk than the last quarter. Economic optimism spiked, and then moderated, during March.

In early March, respondents reported views on the global economy that were more positive than they had been in several quarters. Forty per cent said that global economic conditions had improved in the previous six months. Forty five per cent expected global conditions to improve in the months ahead, while only 28 per cent predicted that conditions would worsen.

But by the end of the month, that optimism had tempered. Respondents were found to be much less positive than they were in early March about current global conditions and the global economy’s prospects—though still more upbeat than they had been in the previous quarter.

After reporting their most positive views on the global economy in several quarters, respondents’ outlook had tempered by late March.

Respondents’ enthusiasm for their home economies rose, and then fell, in March. This change in sentiment was acute in India: 46 per cent of respondents in the late March survey said conditions at home were improving compared with 66 per cent who said the same earlier that month.

Respondents in North America and developing markets report declining positivity between the surveys, and they are more downbeat now than they were in December 2022.

When asked about risks beyond their countries’ borders, respondents have shared consistent concerns about geopolitical instability. In early March, two-thirds cited it as a risk to global growth, a share that has steadily increased since September 2022—and a similar share in the late March survey say the same.

Overall, 72 per cent of respondents from the late March survey say that the pandemic plays only a slight or no role in company planning and decision making, compared with 54 to 59 per cent who said the same in the past four quarters.

Source: FF

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