As we head towards the end of a tumultuous year and look towards 2021. Taplow partners across the globe have combined to give you local and regional insights on the business outlook for the new year.
After this year’s projected contraction due to the Covid-19 hit, the economy is likely to rebound strongly in 2021 as domestic and foreign demand recovers. However, the gradual reduction of fiscal stimulus as the coronavirus shock fades, an elevated unemployment rate and ballooning public debt represent downside risks to the outlook.
Analysts see the economy rebounding and growing 3.4% in 2021, which is down 0.1 percentage points from last month’s forecast. In 2022, forecasters predict GDP growth at 2.5%.
Data from the Brazilian Institute of Geography and Statistics’ monthly index tracking revenues from key services sectors reveals that despite a rebound in Q3, the index is still 9.7% below December 2019. Worst affected are accommodation and food services and air transport, given the difficulties of social distancing while eating out, staying in hotels, and traveling via a plane.
Recovery from an output decline of 5.4% in 2020 will be muted by drag from regional restrictions to combat COVID-19 outbreaks and continued disruption to travel, hospitality and related sectors, leading to output growth of 3.5% in 2021. These developments will be echoed by a slow labour market recovery and low consumer price inflation. With vaccination against the virus set to become general in the latter half of 2021, diminished restrictions and a recovery in hard-hit sectors will support growth in 2022. Growth of the public debt burden will slow.
Federal, provincial, and territorial Governments, along with the central bank, have been appropriately reactive to the evolving economic conditions. Going forward, Governments need greater emphasis on encouraging employment and business recovery through green investment and tackling long-standing structural issues that impede Canada’s business sector. Ensuring that the enhancement of employment insurance is adequate following the termination of the Canada Emergency Response Benefit (CERB) also needs to be a priority. The Bank of Canada should stand ready to provide further liquidity support if required.
Not to disparage anyone or any organization with a pessimistic or ultra conservative outlook, we note that cautious optimism seems to abound. The WFH trend will probably abate somewhat but as major firms are finding that knowledge workers are thriving and in some cases are far more productive, the number of days at the office is likely to remain lower for some-time or perhaps permanently.
Not to be at all negative about the real estate needs, they may increase as distancing for safety may become institutionalized.
While this may not appear to apply to those who require a multi-million-dollar laboratory or test facility to conduct research or test materials, we have differing observations. The reduction in the number of employees, including scientists and researchers who have to be on the laboratory floor has already decreased as more is done using data which is highly distributable. Those highly trained professionals are already very adept at using various data sharing and the possibility of data security breaches is already being addressed by the life sciences and other major research-oriented firms.
The threat of data breach is such that even our Governmental entities and suppliers to Government will enhance their use of security, which will require additional support – albeit with a pipeline of talent that may, dry-up very quickly.
Investment firms are likely to use various secure team communications more efficiently as will other high-level users of both human capital and technology. That will enhance the need to hire capable managers who can work in firms with very mixed understanding of technology utilization.
Overall, we see roles changing at all levels. Virtual communications will be essential. We see Q1 as a ramp up in demand period with activity in some businesses for our services increasing by potentially 100% or more. The discussions we have been having suggest that demand for sales and marketing experts with high level technology backgrounds and scientific experience will increase steadily over the year.
Also related is the impact of the securities markets, if sustained, will drive retirements by many workers and result in increased demand for leaders and managers with more advanced behavioral and technology management/leadership skills to backfill what will possibly be a large number of internal promotions.
Various reporting services as well as white papers published by banks and investment managers as well as rating agencies seems marginally more optimistic. Unemployment amongst unskilled and lower skilled professionals is likely to remain a problem until both the pandemic and training deficiencies abate. This is likely to require increased but still cautious spending by private sector employers and by Government which could cause moderate increases in Government deficits and result in slightly increased taxes at local and national levels.