Projection of a Slow-Growth Economy Continues

Nov 28, 2018

Top executives at large companies around the world anticipate rough going for the foreseeable future and voice less optimism than they did this time last year, according to the 440 executives in seven major economies surveyed by Boston Consulting Group. .

In its third survey of executives during the crisis—following surveys conducted in September and March 2009—BCG found that half of respondents expect an L-shaped recovery, that is, a slow and difficult one. This is a significantly higher percentage than in March 2009, when only 17% were so pessimistic. It also runs counter to the prevailing view, which is suggested by stock market movements and investor behavior indicating that “the crisis is behind us.”

The survey found that the corporate mood abroad is even gloomier than in the United States. In Spain, 64% expect an L-shaped recovery, in Italy 57% expect such a recovery, while in France, the figure is 52%. The Japanese are the most pessimistic, with 72% expecting an L-shaped recovery.

“The somewhat fatalistic views of these global executives corroborate our perspective that one shouldn’t be overly influenced by short-term economic indicators. For the West, at least, once the stimulus effect wears off, we should expect an anemic recovery—the sort of slow-growth environment that will change the rules of the game for companies as they seek to grow amid increased competitive intensity,” said BCG senior partner David Rhodes, coauthor of the new book Accelerating Out of the Great Recession: How to Win in a Slow-Growth Economy (McGraw-Hill, 2010).

“Most developed economies, particularly the United States, face a prolonged period of slower growth. The world view we’re hearing from executives is hardly one conducive to job creation, investment, and risk taking. Executives are, in fact, less enthusiastic about the economic outlook than many of their governments,” said coauthor and BCG senior partner Daniel Stelter.

There is an upside to this, however. Rhodes said, “With executives preparing for a more prolonged, anemic recovery, characterized by greater trade problems, increased consumer price sensitivity, and greater government interference, it is not surprising that many companies are not building so aggressively for the future. However, it is our view that the best companies are both strengthening and rationalizing their core, preparing to ‘attack’ their competitors and take advantage of others’ weaknesses in order to grow." Stelter added, “Company executives are viewing the economic outlook with more caution than the politicians are. But it’s important to remember that those companies that act decisively can significantly outperform even in the toughest of economic times.”