With effort, Indonesia can emerge from the COVID-19 crisis stronger, and brand new Euromonitor Global Economic Forecasts Q3 2020

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Our first feature, entitled“With effort, Indonesia can emerge from the COVID-19 crisis stronger” is based upon the latest report of McKinsey, and giving concrete measures to the country’s government and the economy on how to emerge from the Covid-19 crisis. There are also regarding figures available.

The second item is brand new (published yesterday), where Euromonitor is offering the third quarter forecast on the global economy. With many useful figures and summaries of the most important countries in the world.

Here starts the first feature:

With effort, Indonesia can emerge from the COVID-19 crisis stronger

Despite the social and economic uncertainty and hardship created by the COVID-19 crisis, Indonesia’s leaders can create strategies to advance its economy and prepare for a strong postcrisis emergence.

By  guest authors Vivek Lath, Tracy Lee, Khoon Tee Tan, and Phillia Wibowo from McKinsey. Vivek Lath is a partner in the Singapore office, where Tracy Lee is an associate partner; Khoon Tee Tan is a senior partner in the Jakarta office, where Phillia Wibowo is a partner.

The authors would like to thank Eoin Daly for his guidance and contribution to this article.

All captions and graphics courtesy by McKinsey

Economic systems around the world have ground to a virtual halt as trade flows and tourism have evaporated because of the COVID-19 crisis. In June, International Monetary Fund predicted that the global economy would shrink by 4.9 % in 2020, warning of especially harsh conditions for low- income households.1 Indonesia had already cut its 2020 GDP growth outlook to 2.3 %, from 5.3 %, by April.2, 2020.

Since then, the toll of the COVID-19 pandemic  in Indonesia has grown, with some 145000 COVID-19 cases and more than 6000 related deaths being reported (Exhibit 1).3  The country’s immediate priority is undoubtedly to mitigate and contain the impact of the pandemic on a number of fronts—for example, by encouraging safe behaviors, intervening immediately to mitigate healthcare capacity constraints, and pushing hard on COVID-19 testing. Especially with the prospect of a second wave of infections, such efforts must continue in both the public and private sectors.

Even amid such hardship, however, public- and private-sector leaders can prepare for the postcrisis environment by identifying the changes necessary for the country to emerge stronger after the pandemic—to protect both lives and livelihoods.

Looking ahead, government and corporate leaders can begin to formulate longer-term strategies, that will help Indonesia move forward quickly with building a modern economy. In that context, it’s essential to understand how the country and the world have evolved and to craft strategies that recognise those changes.

Leaving the crisis stronger

While there have been many attempts to describe the next normal after the COVID-19 crisis, its ultimate shape will be the result of many factors that remain unknown today. Such factors include the appearance, duration, and severity of any subsequent wave of COVID-19 cases; time needed to develop and distribute a COVID-19 vaccine; depth of economic disruption; and ability to recover. Despite those uncertainties, however, now is the time for Indonesia to consider the various trends that will define the next normal (Exhibit 2):

—           Healthcare. Changes to the country’s healthcare system and the need to prepare for possible future pandemics will affect the system’s structure, supply chains, and pricing regulations, among other things.

—           Government and regulation. There are likely to be calls for more stringent, cross-sector regulations that provide detailed protocols for the safe operation of different types of businesses, with specific implications for the various stakeholders.

—           Technology and innovation. Lockdowns have channeled many people online for shopping, learning, entertainment, and working, accelerating the shift to digital services. Simultaneously, companies are pushing ahead with internal digitization for staff, customers, and suppliers (for instance, enhancing supply-chain visibility, offering digital learning experiences, and providing new channels to customers).

—           Energy and environment. Working from home, reducing long-distance travel, and other lockdown habits could lead to a permanent shift toward behaviors that are better for the environment.

—           Supply chain. Companies and governments will seek to address supply-chain flaws revealed by the crisis (for example, phasing out just-in-time strategies; encouraging domestic sources for strategic goods, such as food and medicine; and generally accelerating the digitization of supply chains).

—           Work habits. New work habits, such as use of videoconferencing, remote-working solutions, and greater employee flexibility, could give rise to a demand for in-home services—and also encourage “deurbanization.”

—           Society and consumers. Society’s responses to the pandemic will be shaped according to

demographics. For instance, at-risk populations are likely to be more conscious of health concerns; such changes will likely be far more pronounced among baby boomers than Gen Xers or millennials.

—           Social contracts. With the development in some markets of tracking apps designed to inhibit the spread of COVID-19, people may be more willing to waive some privacy concerns in exchange for greater health, safety, and comfort guarantees.

With those themes in mind, we have looked at how Indonesia can reimagine and reform itself after the COVID-19 crisis by considering the following opportunities: increasing national resilience,accelerating the economic transition, rebuilding the tourist sector, and enabling genuine change (Exhibit 3).

National resilience

As Indonesia initiates efforts to increase its national resilience to any future health crisis, two crucial focal points immediately become apparent. The first is domestic manufacturing of healthcare devices  and products, and the second is agricultural reform.

A possible measure with significant potential for Indonesia would be to encourage the development of the country’s medical-device-manufacturing industry. The medical-device market in Indonesia in recent years has been worth approximately USD 1 billion annually and is projected to grow to USD 1.5 billion by 2025.4 A staggering amount (92 %) of those devices, mostly medium- and high-tech devices, were imported. And while Indonesia exported some basic devices, such as surgical gloves, disposable gowns, and hospital beds, it has relied on imports for others, such as specialized scissors.

Expanding that sector for domestic and foreign customers would increase Indonesia’s  resilience and strengthen its economic base. Global demand for medical devices is expected to grow as countries build their stockpiles. Indonesia’s need to import around 17 million face masks during the COVID-19 crisis illustrates the domestic urgency.5 Existing manufacturing infrastructure, such as in the textile industry, could be shifted to meet that demand.

The insurance sector can also be improved to enhance the country’s resilience. For instance, boosting the protection offered to vulnerable populations, creating a national pandemic- insurance pool, and introducing more Indonesians to the benefits of insurance coverage—especially fixed-fee microinsurance offerings—could mitigate strains on the healthcare system during a crisis.

Food security in Indonesia when a global crisis severs international supply lines can be enhanced through reforms that increase domestic rural productivity. In 2018, for example, Indonesia imported around five million tons of sugar and more than two million metric tons each of soybeans and rice.6 What’s more, the country ranked 62nd out of 113 in the Economist Intelligence Unit’s 2019 Global Food Security Index.7 An area for consideration is that demand will increase in many food categories, such as meats, dairy products, and wheat, as incomes rise. Changes to fortify domestic supply lines that serve thousands of islands across the archipelago should also be considered.

Indonesia should identify ways to address  its fundamental agricultural challenges. The agricultural system is fragmented, with most farmers owning less than half a hectare of land, preventing economies of scale and the use of modern equipment and practices. Also, lack of sufficient infrastructure hinders the distribution network, leading to spoilage and shortages.

Digital tools can be used to help fix those challenges.

In China, e-commerce sites have launched  programs to help farmers sell produce online during the pandemic. Such platforms give farmers more confidence and certainty in their markets. One such site, Pinduoduo, reported more than one billion orders of farm products from rural merchants in the first quarter of 2020, a 184 percent year-on-year increase.8 E-commerce platforms can give farmers more confidence and certainty in their markets.

Introducing a digital food-balance sheet that tracks production, demand, reserves, and trade can create greater certainty for producers, consumers, and the government. By using that method and switching from manual accounting, Kenya was able to generate greater efficiencies quickly in areas such  as food-reserve purchases and data collection.

Economic transition

Indonesia can also track  global  changes  sparked by the COVID-19 pandemic and adjust economic strategies to seize opportunities. For example, even before the pandemic, between 2014 and 2016, McKinsey research suggest that China’s share of global exports in labor-intensive manufacturing fell around three percentage points, although it remained dominant. Indonesia has a chance to capture a greater portion of those trade flows. It will need to look at sectors in which the country is fundamentally competitive, with domestic demand as a foundation, while ensuring that there are wide- ranging reforms to the investment framework.


6 Per data from the Economist Intelligence Unit and United Nations.

7 “Rankings and trends,” Economist Intelligence Unit, foodsecurityindex.eiu.com.

8 Xinmei Shen, “13 million farmers are selling goods online in China,” South China Morning Post, May 5, 2020, scmp.com.

The country’s manufacturers could also compete more effectively in the global economy if they digitized more quickly. Modern methods in manufacturing linked to advanced data analysis, automation, machine learning, and other new technologies—a group known as Industry 4.0—are cutting costs and creating efficiencies in plants around the world. A digital capability center in Indonesia would help the country’s manufacturers accelerate through the transition.

Consumer changes also provide  fertile  ground for transforming Indonesia’s economy. Our survey in March 2020 showed that, as a result of the pandemic, Indonesians have a sharply increased preference for locally sourced products across a range of categories.9 For example, 53 percent of

the respondents reported a greater preference for local fruits, and more than 40 percent expressed an increased preference for local products across lines including healthcare, personal care, paper goods, and packaged food.

The survey also showed that the health crisis has made Indonesians more conscious of  product safety and the environment, as well as prevention practices exercised in stores. More than 70 percent of respondents, for instance, said they cared more about product safety and environmentally friendly manufacturing processes and were more willing to research those factors in the wake of the pandemic. Companies that understand such shifts can use the insights to gain market share.

The entertainment industry can also benefit from the consumer habits acquired during lockdown.

 In our survey, 28 % of respondents said they streamed more online content than they did before lockdown, and 68 % said they would continue to watch streamed content once the

crisis had passed. That offers a strong incentive for Indonesian producers and distributors to supply more local content to meet viewers’ increased streaming appetite.

Tourist sector

As the world slowly reopens, Indonesia will be competing with other destinations around the world for the attention of fewer travelers. In mid-April, the government estimated that the country will lose more than USD 10 billion in tourism revenues in 2020, as foreign tourist arrivals in the country are seen to be falling by around a third compared with 2019 levels.10

A first step toward mitigating that downturn would be to develop domestic tourism to compensate for some of the loss in international revenues. Evidence from China suggests that the slowdown in short- haul travel had begun easing by mid-February,  while long-distance travel continued to suffer.

That trend is likely to be repeated in many other markets, pushed largely by travelers younger than 30, who may feel less at risk. To capitalize on that, Indonesia could begin marketing its lesser-known tourist attractions to a domestic audience, once it’s safe to travel. Such an initiative could encourage Indonesians to take short trips within the country to discover and explore such sites as they try to shake off lockdown fatigue.

Indonesia could also use the unintended lull in international travel to improve its tourism infrastructure, such as airports, and standards within the hospitality industry. Taking advantage of the disruption to accelerate improvements could help the country reach its goal of receiving 73.6 million foreign tourists annually by 2045, up from 15.8 million in 2018.11


9 “Survey: Food retail in Indonesia during the COVID-19 pandemic,” April 2020, McKinsey.com.

10 Arys Aditya, Eko Listiyorini, and Harry Suhartono, “As Bali beaches go quiet, Indonesia sees $10 billion loss,” Bloomberg, April 16, 2020, bloomberg.com.

11 Lexy Nantu “Indonesia eyes 73.6M foreign tourists in 2045,” Insider Stories, August 19, 2019, theinsiderstories.com; Riska Rahman, “Indonesia welcomed 15.8m foreign tourists last year: BPS,” Jakarta Post, February 1, 2019, thejakartapost.com.

A problem with waste, particularly plastic trash, linked to the growth in tourism in Indonesia threatens to tarnish the country’s attractiveness for foreign visitors. Bali, which witnessed a sixfold increase in tourism between 1996 and 2018, suffers particularly, with domestic and foreign tourists generating 34 times more waste than residents, per a National Geographic estimate.12 Initiatives to clean up the waste and increase recycling that were begun before the pandemic could be accelerated, giving foreign arrivals a better experience once traffic increases again.

Genuine change

In addressing Indonesia’s mid- and long-term economic aspirations—even during a time of dramatic disruption—the country can’t lose sight of the basic measures that will enable sustainable beneficial change in the country’s economy. Even before the pandemic, challenges to the country’s economic development had been identified, and leaders can continue efforts to address these.

One of the most important efforts is to develop appropriate talent for a modern economy. A McKinsey study has shown that modern technology, including automation, could create more jobs in Indonesia than are lost between 2014 and 2030.13 The estimated net gain is between nine million and 24 million jobs (Exhibit 4).

Many of the new jobs will require new skills, and we have estimated that the country will face a shortage of around nine million workers with much-needed digital skills between 2015 and 2030. Indonesia can build from the online-learning efforts and habits developed during the pandemic to teach those new capabilities more broadly and more quickly. More than three-quarters of the respondents in our Indonesia survey said they would continue or increase their online learning activities once the crisis subsides. Remote learning can also help correct a talent imbalance, with much of the country’s best talent centered in Jakarta, creating shortages elsewhere.


12 Amanda Tazkia Siddharta, “Bali fights for its beautiful beaches by rethinking waste, plastic trash,” National Geographic, October 14, 2019, nationalgeographic.com.

13 Vishal Agarwal, Michael Chui, Kaushik Das, Vivek Lath, and Phillia Wibowo, “Automation and the future of work in Indonesia,” September 2019, McKinsey.com.

Indonesia survey said they would continue or increase their online learning activities once the crisis subsides. Remote learning can also help correct a talent imbalance, with much of the country’s best talent centered in Jakarta, creating shortages elsewhere.

Productivity gaps can also be narrowed as Indonesia’s leaders work to erect a modern economy. While the country has gradually improved labuor productivity over the past decade, levels remain lower than those in peer countries in Southeast Asia, including Malaysia, Singapore, and Thailand.

Infrastructure development will remain a concern, even as the pandemic shifts some of the priorities. Pressure could rise for better logistics to support home deliveries and improved digital infrastructure in general. Connectivity—physical or virtual—will be especially important for the country’s more remote islands. The pandemic has also brought into clearer focus the need for improved sanitation and access to clean water, as well as other improvements in conditions, such as a reduction in overcrowded living spaces and multiple access points to homes. Infrastructure development is also a way to increase employment, especially at the bottom of the income pyramid, so it’s a route to stimulating spending in a productive fashion.

When a crisis of any kind strikes, taking attention away from immediate concerns is difficult. Looking toward the future, however, won’t dull the efforts needed to control and minimize the personal and societal harm caused by the COVID-19 crisis. Instead, it demonstrates optimism in a future characterised by the next normal and a commitment to persevere, even during hard times, with reimagining a new Indonesian economy.


Here starts the second feature:

Euromonitor: Global Economic Forecasts Q3 2020

The guest authors

Euromonitor International Analytics offers precise answers to vital business questions in an increasingly fast-paced and uncertain world. Our Macro Model provides regularly updated forecasts and “what-if” scenarios for core macroeconomic variables, including gdp, growth and unemployment. Its global scope ensures our macro forecasts and scenarios reflect the economically inter-connected world in which we live.

All captions and Graphics courtesy by Euromonitor

The Global Economic Forecasts report focuses on quarterly macro changes for the world’s key economies and what these mean to our view of the likely, optimistic and pessimistic scenarios for the global economy. Ultimately, we help businesses stay ahead of risks and opportunities as they emerge on a macroeconomic basis.

In q3 2020, global economic activity levels remain significantly below normal, despite the relaxation of the strictest Coronavirus (covid-19) pandemic social distancing measures. Under the baseline / most likely scenario, the global economy is headed for the worst global recession since the great depression of the 1930s, with global output set to contract by 3–6 % in 2020.

A relatively strong expected recovery in 2021, with growth of 3.5–7 %, would still leave global output in 2021 around 5.5 % below pre-covid-19 forecasts. Even in 2022, we expect global output in the baseline / most likely scenario to be around 4.5 % below the pre-covid-19 forecast.

The 2020 global gdp growth baseline forecast has been downgraded.

Global Real gdp Growth Baseline Forecast by 1.5 percentage points compared to the May forecast, with a 1.2 percentage point downgrade for advanced economies and a 1.7 percentage point downgrade for developing economies. This mainly reflects the worse than expected economic effects of the pandemic in Western Europe, India and Latin America (which emerged during the summer as a new major centre of the pandemic).

The pandemic has worsened in developing economies, leading to greater than expected hits to economic activity in countries with big informal sectors and less scope for social distancing.

The August forecast also assumes more persistent social distancing effects in h2 2020, and more adverse effects on the productivity of businesses as they make adjustments to reduce covid-19 infection risks (e.g. more resources devoted to hygiene and social distancing.

The level of uncertainty facing the global economy remains unprecedented, related to risks of further covid-19 pandemic waves and possible delays in the production and wide distribution of a vaccine or treatment . The baseline forecast is only assigned a 41–51 % probability, with the remainder going to more adverse covid-19 pessimistic scenarios.

In the August global economic outlook, we have made a comprehensive revision of the covid-19 pessimistic scenarios, based on more information and understanding about possible covid-19 pandemic effects and risks since March 2020.

Recent shifts in the dynamics of the pandemic, especially in the US and Europe, raise concerns of a major second pandemic wave. The covid-19 Pessimistic1 scenario is now the main global second wave scenario, featuring a much slower global recovery in 2021 compared to the baseline forecast. The baseline forecasts assume that a vaccine is available for widespread distribution around mid-2021. This is based on an unprecedented epidemiologic research effort with several promising candidates.

However, the previous fastest vaccine development took around 4 years. Complications in vaccine development and deployment could cause further risks to the baseline outlook, also captured by our pessimistic scenarios.

Our covid-19 pessimistic 2 and 3 scenarios have now been revised to account for risks of a more delayed roll-out of an effective covid-19 vaccine or treatment in 2022–2023.

Covid-19 Pessimistic 1 scenario: Highest probability downside risk

Global Real gdp Growth covid-19 Pessimistic 1 Forecast scenario continue through most of 2021.

Longer lasting social distancing effects cause larger drops in consumption, business revenues, employment and wages relative to the baseline forecast. The rise in business closure rates in high social contact sectors is significantly higher than in the baseline forecast, amplified by worsening credit conditions.

Due to the intense second wave, the economic recovery is much weaker than in the baseline forecast, with global output growth in 2021 of 0–3%.

Estimated probability: 25–35% over a one-year horizon.

Covid-19 Pessimistic 2 scenario: Top downside risk scenario

Global Real gdp Growth covid-19 Pessimistic 2 Forecast

This is our main global downside risk scenario in terms of the combination of probability and impact on economic activity.

In the covid-19 Pessimistic2 scenario, there is a more significant second global pandemic wave in 2020 compared to the Pessimistic1 scenario, followed by a third and fourth possible wave in 2021. Large-scale distribution of an effective covid-19 vaccine or treatment is delayed until 2022–2023, leading to more prolonged social distancing measures.

Longer lasting and deeper social distancing effects in 2021–2022 cause much larger drops in consumption, business revenues, employment and wages compared to the Pessimistic1 scenario. Sharper and prolonged cashflow shortages and worsening credit conditions cause more widespread business closures in many sectors.

Global gdp growth in 2020 ranges from -8.5 % to -6 % in this scenario. Global output growth in 2021 remains negative, ranging from -3 % to 0 %, followed by a partial recovery in 2022–2023.

Estimated probability: 15–25 % over a one-year horizon.

General outlook

In the baseline / most likely forecast, US gdp declines by 5–8 % in 2020 and increases by 2.2–5.8 % in 2021. The level of US output is only expected to recover to its 2019 level in 2022. This would still be around 4 % below the level itwould have reached in the pre-covid-19 forecast, three years after the start of the pandemic. Probability at a one-year horizon: 41–51 %.

US gdp declined by 9.5 % year-on-year in q2, according to the first estimate (compared to 0.3 % year-on-year growth in q1), putting it roughly 11–12 % below pre-covid-19 forecasts. The sharp contraction was mainly driven by weak consumer spending, with falling business investment playing a significant but secondary role.

Economic activity rebounded strongly in May–June. Nominal retail sales in July were 5.8 % above a year earlier (compared to average year-on-year growth of 3.3 % over 2015–2019), suggesting a full recovery in the retail sector. In July, however, covid-19 cases and deaths in the US started rising again to levels similar to those of April–May. This has caused significant reversals in previous re-openings and the tightening of social distancing restrictions in many US states.

The previous economic recovery momentum slowed down during q3, with consumer confidence declining again according to some measures, and Google mobility reports showing stable or declining movement in retail and recreation sectors at around 14 % below normal towards end of August. The amount of fiscal support provided by higher unemployment benefits introduced in March is also likely to be scaled back substantially due to Republican opposition to extensions at the same level. This is likely to significantly constrain the recovery in consumer spending.

As a result, we have downgraded the baseline outlook for US gdp growth by around 0.7 percentage point since May, despite the initially strong economic reopening rebound after lockdowns were relaxed.

General outlook

In the most likely / baseline scenario, we expect China’s gdp growth to range from -0.3 % to 2.7 % in 2020, followed by gdp growth of 6.3–9.3 % in 2021. Probability at a one-year horizon: 41–51 %.

The Chinese economy has rebounded better than expected from the covid-19 outbreak, based on official statistics. Output in q2 2020 was around 3% below the pre-covid-19 forecast level. However, consumer spending, retail sales and service sector activity are still significantly below normal. The economic rebound required a substantial boost to public infrastructure and investment spending, which may not be sustainable beyond the short term.

gdp growth increased to 3.2% year-on-year in q2 2020, after a 6.8 % year-on-year contraction in q1. In the first half of 2020, the year-on-year output decline was 1.6 %, industrial production fell 1.3 % year-on-year and the services production index contracted by 6.1% year-on-year. Per capita real consumer spending declined by 9.3 % year-on-year in the first half of the year.

The differences between these growth rates emphasise that the pandemic had a much stronger impact on services and consumer spending, compared to manufacturing, leading to a two-track recovery from the pandemic.

General outlook

The number of covid-19 cases in India became the third highest in the world in August 2020, and real gdp is predicted to decline during 2020, compared to the positive forecast in q2.

India’s economy is expected to contract by 3.7–5.1 % in 2020 and then rebound with growth of 5.7–9.1 % in 2021.

Preliminary q3 data show a significant increase in trade activity. Real exports were down by 33% in q2 2020, due to trade restrictions and lower global demand, while in q3 they are expected to increase by 67% and reach pre-covid-19 levels.

Slowing demand continues to reduce price growth. In q2 2020, annual price growth was around 5.2 % year-on-year, while in q3 it is expected to reach approximately 2.6 % year-on-year, which is just within the Reserve Bank of India’s 2–6 % target.

After a series of interest rates cuts and support for expansionary monetary policy, the Reserve Bank of India decided to stop cuts and keep the base interest rate at 4%. The decision was made as a result of consumers and businesses saving money rather than increasing consumption by borrowing.

General outlook

The Japanese economy is predicted to contract between 5.2 % and 6.6 % in 2020. Under our baseline scenario, the economic recovery will begin in 2021, when the country’s economy will see real growth of between 1.2 % and 4.0 %.

In q3 2020, we have downgraded Japan’s outlook, increasing the real gdp contraction in 2020 by approximately 0.4 percentage points. The main reason for the deteriorating outlook is a second wave of infections in the country, which started in mid-July.

Currently, the rise of infections is slowing down, making the current outlook for the economy stable. Nevertheless, downside risks remain which are considered in our alternative scenarios.

Japan’s economy shrank by 7.8 % in real and seasonally adjusted terms in q2 2020. This contraction was worse than the 7.1 % drop in q1 2009 — the worst quarter during the Global Financial Crisis of 2009 for the Japanese economy.

Significant fiscal stimulus is the only factor supporting the economy. The Japanese government is implementing 21.1 % of 2019 gdp fiscal stimulus aimed at safeguarding businesses and individuals in the economy. The aim is to limit the damage to the economy, so that once the social distancing effects subside, the economy can quickly reopen.

Nevertheless, the massive fiscal stimulus will weigh heavily on already weak government finances in the country.

General outlook

In the baseline / most likely forecast, Eurozone gdp declines by 8–11 % in 2020, followed by 3.5–7 % growth in 2021. Probability at one-year horizon: 41–51 %.

The Eurozone economy seemed to be recovering better than expected in some sectors during May–June 2020, with retail sales volumes roughly back to normal levels in June. However, this came after a 15% year-on-year decline in Eurozone gdp in q2. Furthermore, covid-19 outbreaks worsened in July and August, with the number of new cases per day approaching that at the end of April.

Measures such as mandatory mask-wearing in indoor spaces have been imposed in many Eurozone countries. Lockdowns have been re-introduced in some highly affected cities, and travel restrictions have also increased. Further steps are likely to include more restrictions on leisure and hospitality services (e.g. reduced working hours) and more local lockdowns.

European leaders are desperate to avoid another round of complete lockdowns, as seen in March. Nevertheless, risks of a more severe second wave scenario, with more extensive restrictions and partial lockdowns, are a cause for concern as of the end of q3.

At the end of July 2020, EU leaders approved a joint EU covid-19 economic recovery plan. The deal would see the EU collectively raise EUR 750 billion over a few years on debt markets and distribute EUR 390 billion in grants and the remainder in loans to member states, in proportion to population and the magnitude of the adverse impact of covid-19 on the economy. The transfers and spending from this package are unlikely to filter out into the EU economy before 2021, with the fiscal stimulus being distributed over several years.

The European Commission estimates that the package will boost EU output by around 2 % by 2024, ranging from a 1 % boost for higher income countries, such as Germany, to 4 % in higher debt and lower income countries, such as Italy. There is substantial uncertainty as to how the package funds will be distributed, at what speed and how they will be spent. Implementation of this package has in part already been factored into previous forecasts.

Therefore, we have cautiously added another 0.3–0.6 percentage points higher annual gdp growth to 2021–2024 forecasts for the worst hit Eurozone economies, following the announcement of the package.

General outlook

The UK economy is predicted to contract by 10.6–11.6 % in real terms in 2020 (muchdeeper than the 4.2 % contraction in the 2009 recession). Under the baseline scenario, the economy will start to recover in 2021, with real gdp growing by 4.1–6.6 %.

The baseline scenario for the UK economy assumes no global second wave of the covid-19 pandemic and a Free Trade Agreement (fta) with the EU being reached by the end of 2020. The UK economy has considerable downside risks coming from rises in infection rates and a potential No-Deal Brexit at the end of 2020. A No-Deal Brexit could considerably prolong the economic downturn.

We have lowered UK real gdp 2020 forecast by 4.3 percentage points in q3 2020. This comes as labour markets are hit hard compared to other countries in Western Europe and due to an increasing probability of a No-Deal Brexit as negotiations remain at a standstill. Therefore, we have raised the probability of a No-Deal Brexit by 15 percentage points in q3 2020 from 35 % to 50 %.

The UK economy fell by 20.2 % in q2 2020 compared to q1 2020 in real terms. That is the worst contraction on record. However, during the summer the covid-19 infection rates were relatively under control which allowed the government to slowly reopen the economy and improve the business sentiment.

Under the baseline scenario, the UK economy will take until 2023 to reach the 2019 level of gdp in real terms.

General outlook

In the baseline forecast scenario, Russian gdp is expected to decline by 5.8–7.9 % in 2020. Russia’s economy would start its recovery in 2021 and grow by 3.2 %. The economy would take until 2023 to reach 2019 level of output.

The Russian economy contracted by 8.5 % year-on-year in q2 2020. After a sharp contraction in q2, the q3 outlook shows signs of improvement. The covid-19 infection curve is flattening in the country, allowing consumer and business confidence indicators to slowly recover from their historic lows in q2.

The Central Bank of Russia cut its key interest rate by another 25 basis points in July 2020, to spur economic activity. As a result of the central bank’s actions, inflation in the country is on the rise: annual inflation increased from 3.0 % in May to 3.8 % in July. The rise in inflation is likely to limit further actions from the central bank.

On the fiscal side, the government is implementing a fiscal stimulus package valued at 3.4% of gdp. The fiscal stimulus is mainly aimed at increasing unemployment benefits, as well as supporting small and medium sized enterprises with subsidised interest rates and tax payment deferrals.

General outlook

With extreme uncertainty in both the domestic and global outlooks related to the outbreak of the pandemic, our baseline real gdp growth forecasts have been downgraded. We expect real gdp to decline by roughly 9.0 % in 2020, with growth of 3.3 % in 2021. This baseline forecast is assigned a 41–51 % probability.

As of the end of August 2020, Brazil has the worst covid-19 outbreak in the world after the United States. President Bolsonaro, who also tested positive for the virus, continues to downplay the impact of the pandemic. He strongly advocates against any social distancing and lockdown measures, as these restrictions are disrupting frail economic recovery.

Due to the severe spread of the pandemic and unusually high risk of volatility in domestic and global markets, the interest rate has been dramatically reduced once again. However, Central Bank acknowledges that further reductions should be done with extreme caution.

Shrinking economic activity, prolonged uncertainty, reduced demand and rising precautionary savings leave inflation well below the target of 4.0 %.


We have maintained the same probabilities for the covid-19 pessimistic 1 and 2 scenarios, while reducing the probability of the covid-19 pessimistic 3 scenario. These scenarios have now been redefined to better capture a major second wave risk (covid-19 pessimistic 1) and to capture a delay in vaccine development (covid-19 pessimistic 2 and 3). As a result, the economic effects of these scenarios are now greater than in the May forecasts, leading to higher Global Risk Index scores.

Lack of progress in Brexit negotiations and the negative effects of the covid-19 pandemic on UK businesses’ preparation for a shift in the trade regime with the EU have increased the probability of both No-Deal Brexit scenarios.

We have reduced the probabilities assigned to the trade war scenario. This reflects the likelihood that the Democratic candidate Joe Biden wins the US presidential election in November 2020. However, it is too early to count on a Biden victory eliminating.

Euromonitor International Global Risk Index, August 2020

Euromonitor International’s Global Risk Index provides a convenient summary of the impact and likelihood of different negative global scenarios. This allows you to rank major risks to the global economy and prioritise those that are more significant for business and financial stress-testing.

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For more detailed analysis around the economic forecasts by country for this quarter, purchase the full Global Economic Forecasts Report or Request a live demonstration to learn more about the power of Passport.


» Forecast closing date: August 17, 2020

» All gdp and gdp components growth rates are in real (inflation adjusted) terms unless stated otherwise.

» All annual gdp and gdp component growth rates are for January–December calendar year unless stated otherwise.

» All quarterly gdp and gdp components growth rates are year-on-year unless stated otherwise.

For further insight, do not hesitate to contact us at analytics@euromonitor.com


The Newsletter of last Week

A roadmap toward a common framework for measuring the Digital Economy, and the Malaysian Apparel and Accessories Market and Players https://textile-future.com/archives/57675

The highlights of TextileFuture’s News of last week. For your convenience just click on the feature.


Kimberly-Clark to acquire Softex Indonesia https://textile-future.com/archives/57876

Bankrupt J.C. Penney Is Bought by Mall Operators in Need of Tenants https://textile-future.com/archives/57886


French Textile Machinery targets Markets in MENA Region https://textile-future.com/archives/57756


For the body shops of the future: BASF launches new waterborne basecoat line https://textile-future.com/archives/57705


2020 Tabbie Award Presented to AATCC for Feature Article in AATCC Review https://textile-future.com/archives/57822


Bioeconomy worth 2.4 trillion EUR to the European economy https://textile-future.com/archives/57825


BASF launches “Empowering Movement” brand strategy for Infinergy https://textile-future.com/archives/57744


First direct complete train with Austrian TENCEL™ fibres arrives in China after 16 days https://textile-future.com/archives/57785


The Transistor out of the Printer – Circuits on all kinds of material https://textile-future.com/archives/57841


Shima Seiki selects Archroma’s ‘Colour Atlas’ library system for their new design software https://textile-future.com/archives/57855


McKinsey’s weekly Charts https://textile-future.com/archives/57686

OECD CLIs continue to strengthen, but at a slowing pace https://textile-future.com/archives/57724

OECD unemployment rate falls to 7.7 % in July 2020 but remains 2.5 percentage points higher than in February https://textile-future.com/archives/57775

GDP down by 11.8 % and employment down by 2.9% in the Euro Area, in the EU GDP down by 11.4 % and employment down by 2.7 % https://textile-future.com/archives/57802

Swiss economy performing better than expected https://textile-future.com/archives/57829

McKinsey’s week in Charts https://textile-future.com/archives/57946

OECD – Unprecedented falls in GDP in most G20 economies in second quarter of 2020 https://textile-future.com/archives/57968

Data Protection

FDPIC considers CH-US Privacy Shield does not provide adequate level of data protection https://textile-future.com/archives/57754

Design Museum

Terence Conran, founder of the London Design Museum, designer, philanthropist and businessman, has passed away on Saturday 12 September, he was 88 years old https://textile-future.com/archives/57927


New priorities for digital Switzerland https://textile-future.com/archives/57879


EU Commission adopts proposal to make EU-U.S. agreement on tariffs effective https://textile-future.com/archives/57797    

EU and China sign landmark agreement protecting European Geographical Indications https://textile-future.com/archives/57966


Innovative industrial solutions for a better world   https://textile-future.com/archives/57864  

Jewellery & Gem Digital World gears up for October debut https://textile-future.com/archives/57953

Fast Fashion

Why fast-fashion brands are thriving on TikTok https://textile-future.com/archives/57736


Bayer: Supervisory Board extends CEO Werner Baumann’s contract until the end of April 2024 https://textile-future.com/archives/57904

The European Commission appoints a new Director in DG REFORM https://textile-future.com/archives/57904

EU names Dombrovskis as its new trade chief https://textile-future.com/archives/57904    

Mairead McGuinness as the new financial services commissioner https://textile-future.com/archives/57904

Swissmem to elect new President – Forbo – Change at the Executive Board https://textile-future.com/archives/57904


F2FMART: Marketplace for ready-to-sell and wholesale goods https://textile-future.com/archives/57960

New Products

Devan shows high activity of BI-OME against SARS-COV-2 and other viruses after intense washing https://textile-future.com/archives/57832

Enhanced Sealing Integrity and Puncture Resistance https://textile-future.com/archives/57853

Plastic Supply Chains

Circularise raises EUR 1.5 million to trace the plastics supply chains https://textile-future.com/archives/57836

Pop -up stores

Why Lululemon is betting on pop-up shops during the holidays https://textile-future.com/archives/57896


Research in times of COVID-19 https://textile-future.com/archives/57738 


LyondellBasell Successfully starts-up New Pilot Molecular Recycling Facility https://textile-future.com/archives/57799


Neiman Marcus Adds More Stores to Its Closures List https://textile-future.com/archives/57709

How Lands’ End refocused its product assortment to stave off inventory problems https://textile-future.com/archives/57711

Macy’s plans rollout of smaller stores away from malls https://textile-futuOECD CLIs continue to strengthen, but at a slowing pacere.com/archives/57717 

Gap is closing more than 200 stores this year https://textile-future.com/archives/57720


DEMCO Sustainability Road Map 2019-2025 https://textile-future.com/archives/57698

Unilever to eliminate fossil fuels in cleaning products by 2030 https://textile-future.com/archives/57767

UN announce Amann as one of the TOP 50 Sustainability & Climate Leaders! https://textile-future.com/archives/57791

HolyGrail 2.0 launched: Mondi trials digital watermarking to separate waste for a circular economy https://textile-future.com/archives/57847

Gap + Textile Exchange to Publish Sustainable Fibres Toolkit for Apparel Industry https://textile-future.com/archives/57934


WTO – The Philippines launches safeguard investigation on high-density polyethylene and linear low-density polyethylene pellets and granules https://textile-future.com/archives/57722

U.S. Economy

U.S. Consumer Prices Broadly Rebounded in August https://textile-future.com/archives/57939


Vietnam textile and garment businesses strive to seize EVFTA opportunities https://textile-future.com/archives/57820


Free Webinar on Wiping unsustainable Worries away (September 16, 2020) https://textile-future.com/archives/57870