The Lens is a weekly newsletter published by DuckerFrontier’s Global Economics and Scenarios team to highlight developments and trends that will have the highest impact on business scenarios. Our teams of analysts are conducting research into the potential impacts of the novel coronavirus (COVID-19) on the global economy and business environment. Subscribe today to receive the latest insights on COVID-19 business impacts in your inbox every Thursday.
Read an excerpt from this week’s edition of The Lens below as you prepare your business for coming changes.
While industrial production’s return to positive growth is encouraging, persistent weakness in demand portends rising inventory levels and growing pricing pressures for Chinese firms. Due to this uneven recovery, we continue to expect an “extended V-shaped” recovery of the Chinese economy, with growth of just 1.2% YOY for the current quarter, before a more robust rebound on the back of a soon-to-be-announced stimulus package.
With the emergence of a second-wave of infections in several cities in China, normalization of consumer behaviors will be further delayed. This dynamic, compounded by rising unemployment and a weak social safety net, will continue to hamper consumption recovery in China. To maximize their revenue upside amid increasing price sensitivity, B2C firms should segment their consumers and consider offering coupons, bundling products, and prioritizing online channels over brick and mortar stores. In contrast, B2B firms should capitalize on sectors and firms that are more resilient or better positioned to benefit from China’s fiscal stimulus (in sectors such as infrastructure, technology and healthcare).
Boyang Xue, Analyst for Northeast Asia
FrontierView clients: See our more recent China Market Monitor for further insights
Mexico’s government has barely attempted to prevent the economic fallout generated by COVID-19. The López Obrador administration has refused to put forward a fiscal plan, and it is unlikely that it will change course, as President Andrés Manuel López Obrador (AMLO) reiterated last Saturday when he presented his economic policy to tackle COVID-19. AMLO’s proposal prioritizes his administration’s social programs and infrastructure projects, such as the Dos Bocas oil refinery and the Mayan train, while not providing relief measures to help businesses.
Business sentiment will continue to decline in Mexico as the economy goes through a deep recession. Mexico’s economic recovery will greatly depend on exports to the US market, domestic demand, and investment stemming from the USMCA. This will be gradual as firms are already expecting a slow recovery in Latin America’s second largest economy.
Alejandro Valerio, Senior Research Analyst for Latin America
FrontierView clients: See our more recent Mexico Outlook 2020-2021-May 12 Webinar further insights