McKinsey On COVID-19 Implications For Business

Kevin Mwanza
Written by Kevin Mwanza
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The spread of COVID-19 could see consumer spending heavily impacted until the end of September or perhaps even the end of the year, analysts report. Chinese family wearing face masks walk in a pedestrian crossing in Bangkok, Thailand, Wednesday, Jan. 29, 2020. Image: AP Photo/Gemunu Amarasinghe

With the Coronavirus disease now well established in four separate geographies — China, East Asia, the Middle East, and Western Europe — businesses across the globe are facing a slowdown, with consumer activity likely to be impacted until the end of September, according to a clients’ note by consultancy firm McKinsey.

The spread of COVID-19 could further push the global economy into a recession if it heavily affects Africa and South America too, with a demand shock that is expected to continue until the end of the year.

Even on McKinsey’s more conservative base case, it is likely that large numbers of people will find themselves either out of work or not working enough, with many small businesses likely to hit the wall.

COVID-19’s spread reached an inflection point on Feb. 24 when new infection cases outside China exceeded those within China for the first time, with 54 countries that hold 40 percent of the global economy reporting cases, a Feb. 29 update by the World Health Organization showed.

Data from March 9 shows that the virus has spread to 95 countries globally — almost 110,000 people are infected.

“As other geographies experience continued case growth, it is likely that movement restrictions will be imposed to attempt to stop or slow the progression of the disease. This will almost certainly drive a sharp reduction in demand, which in turn lowers economic growth through Q2 and early Q3,” McKinsey said in the note.

“Demand recovery will depend on a slowing of case growth.”

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Already sectors like aviation, tourism, and hospitality have seen decreased demand as people travel less and eat less outside their homes, McKinsey said.