Five megatrends that will shape the economy and society until 2025

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In a new report, Kearney strategists have outlined what the firm believes are five major trends that will significantly shape the global economy and society through 2025. A roundup of the five mega-trends.

Governments under siege

Covid-19, global protests against systemic inequalities, climate change and widespread economic issues ranging from income stratification to unemployment. These are just a few of the issues that place enormous burdens on federal, regional and municipal governments around the world.

As the pandemic assails governments around the world, many leaders are using fiscal and monetary tools to mitigate the economic fallout. The scale of tax interventions is impressive, however, over the next five years governments will face repayment problems in the future.

Advanced economies may be able to bear an additional burden of debt and low interest rates for a while, but those bills will eventually come due. Emerging markets face more immediate challenges, as funds dry up sooner and borrowing opportunities are more limited. In addition, their currencies are less accepted around the world, which leaves them less room for maneuver than their more developed counterparts.

As budget deficits persist through 2025, national governments increasingly constrained by outstanding debt and fewer economic policy prerogatives will look to local governments and the private sector for support in order to maintain public confidence.

Push for national self-sufficiency

The pandemic has served as a warning to national governments about the need for self-reliance and resilience in the face of the crisis. As governments strive to improve their national capacities in key sectors – healthcare, technology, food, energy and manufacturing – the private sector may find opportunities for increased collaboration with government. However, too much government intervention could stifle innovation in the long run.

Government balance as a percentage of GDP, debt flow

Blocked segments of the company

Over the next five years, growing inequalities – exacerbated by Covid-19 – will lead to further marginalization of stranded segments of society, including minorities, low-skilled workers, students, children, working mothers and other. Their reintegration will be a big challenge in a weak economic environment, but it requires governments and businesses to work together to requalify and reposition these important groups in society.

Increased food insecurity

A global food crisis is looming on the horizon, with disproportionate downward consequences for emerging markets. Food supplies are tightening due to trade restrictions and production disruptions induced by Covid-19, and incomes plummet amid the economic crisis. The five-year outlook suggests the situation will worsen, leading to changes in the food industry, deepening inequalities between countries and lower overall productivity.

Food insecurity can have broad (business) implications. Hunger has been linked to stunted growth, a condition that can be accompanied by physical and cognitive problems that last into adulthood. Globally, more than 20 percent of children under five were stunted in 2019. In parts of Africa and Asia, the combined productivity and economic losses of stunting can reach up to 11 percent of GDP.

Percentage of the population in a situation of food insecurity

More generally, Chatham House has found that malnutrition in emerging markets can cost businesses up to $ 850 billion in lost productivity. High food prices, for example, can increase the likelihood of civil unrest, as seen in Chile and Lebanon, where

Massive protests against food shortages (and high prices) have led to instability in the operating environment by disrupting business activity and potentially causing sudden policy changes.

In October, global food prices rose 8% since the lockdowns peaked in May, and experts say the increase is hitting emerging markets particularly hard.

Industry consolidations, mergers and acquisitions

Extended lockdowns amid Covid-19 and other pandemic-related dislocations have squeezed the profit margins of many companies around the world, leading to record levels of defaults. This economic shock is about to trigger a wave of mergers and acquisitions (M&A) as stronger firms acquire weak rivals, technologies and assets at rock bottom prices.

Food prices

Companies in several sectors will look for competitors over the next five years. In the meantime, with more than $ 1.5 trillion in capital and a sea of ​​financially weakened targets made available thanks to Covid-19, private equity groups have rolled out their record levels of dry powder in the months that have followed the pandemic, more than 5,500 offers in the first nine months of 2020.

This trend will persist over the medium term, driven by stronger companies in sectors benefiting from the pandemic – such as grocers, e-commerce and digital businesses. Of course, big tech companies are also looking to acquire. Between January and May 2020, tech giants such as Alphabet, Amazon, Apple, Facebook and Microsoft announced their highest number of acquisitions since 2016 (a total of 19).

Generally speaking, a wave of mergers and acquisitions is likely to result in a realignment of market power in certain sectors, including healthcare, airlines, grocery, retail, manufacturing and automotive components, which were listed above. already among the most oligopolistic industries before Covid-19. While emerging regulatory measures – like those in the tech arena – may dampen some of the acquisition enthusiasm, the pool of attractive targets across sectors will only grow over the next five years. .

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