New Economic Reality: Transforming Uncertainty into Opportunity

April 2023

Businesses and consumers are facing a new economic reality as the global economy enters a period of slower growth and high inflation, while energy pressures, rising cost of capital, tight labour market, geopolitical risks and a reset of globalisation are adding challenges and uncertainties. This report unfolds the implications of the new economic environment on consumption and business outcomes, while pointing toward an actionable plan for business to build resilience and win.

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This report comes in PPT.

Key Takeaways

Inflation and economic slowdown affect consumer spending power and businesses’ bottom line

Slower economic growth and elevated inflation are expected to remain in the short and medium term, eroding consumer purchasing power and changing their behaviour, while making it challenging for businesses to retain their profit margins and find growth areas.

Energy pressures underline the importance of business strategy adjustment

Energy price and supply shocks have a ripple effect on business activities, costs and prices of end-products, as well as consumer behaviour. To mitigate the impact of energy market fluctuations, businesses are shifting to renewable energy and energy-efficient solutions, optimising energy consumption and overhauling their business strategies.

High interest rates and financial instability raise the cost of doing business

Higher cost of capital and tighter credit conditions are expected to prevail over the medium term, constraining consumers’ and business’ access to finance, with the construction, manufacturing and business services sectors being hit the hardest.

A reset of globalisation occurs as companies focus more on resilience

Geopolitics and global disruptions are reshaping global trade, resulting in fragmentation and volatility risks which challenge global business. Rather than a de-globalisation, a de-risking of global supply chains is taking place as companies attempt to make themselves more resilient to external shocks, while still seeking growth in international markets.

Labour market changes impact companies’ operation and productivity

Demographic shifts and global disruptions have contributed to a rise in labour shortages, skills mismatch and changes in worker preferences. Businesses will need to make both short- and long-term strategies on how to best navigate the challenging labour market.

Key takeaways
Exploring the New Economic Reality
Drivers of New Economic Reality
N ew Economic Reality uncovered
Elevated inflation and economic slowdown hit consumer spending and business bottom line
Case study: Unilever streamlines product range to cut cost and enhance efficiency
Pricing, portfolio and cost management are key to navigate through economic downturn
Energy price and supply shocks undermine global energy security and raise business costs
Case study: Sleep Country installs BrainBox AI technology to boost energy efficiency
Energy transition and strategic adjustment are crucial to withstand potential future shocks
Higher cost of capital to hurt construction and business services sectors the most
Tighter credit conditions can further restrict access to capital and constrain growth
Case study: Intel employs cost-cutting measures to preserve capital
Case study: OfBusiness helps SMEs to finance their growth
Monitoring market conditions will be crucial for adjusting to the rising cost of capital
The global economy will face a reset rather than de-globalisation
Diversification and industrial policy will shape the reset of globalisation
Case study: Foxconn nearshoring Apple production to Vietnam to diversify from China
Case study: Manwah’s nearshoring of production to Mexico targets its main market in the US
High uncertainty requires companies to continuously evaluate risks and opportunities
Tight labour markets have pushed up wages and challenged labour-intensive sectors
Short- and long-term business strategies are needed to safeguard against labour shortages
Case study: Walmart raises minimum wages and provides additional benefits to employees
Case study: Primark using automated cranes and driverless vehicles
Talent retention and productivity growth are key strategies
Key takeaways
New Economic Reality: How to win
Evolution of New Economic Reality
Questions we are asking


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