Downside risks in our forecast remain high as the Delta variant continues to spread globally, while obstacles to vaccine distribution, supply chain disruptions, and US–China relations persist.

Over the entire forecast period, the stakes are striking. Between 2021 and 2023, the cumulative global output difference between the best-case and worst-case scenarios is more than $11 trillion.

Will the Delta variant and supply chain disruptions derail the global economic recovery? No—but they will create additional economic risk and uncertainty

Although the specific business implications will vary based on a company’s home market, geographic footprint, and sector, several high-level implications emerge from our analysis:

A COVID recovery is not guaranteed. The emergence of the Delta variant has highlighted that the pandemic persists. Strategic businesses will build resilient supply chains, prioritizing employee safety and taking advantage of government incentives to boost domestic production of key goods.
Inflation pressures will increase business costs. The combination of fiscal stimulus, expansionary monetary policy, input cost increases, and supply–demand dislocations is fueling inflation that is unlikely to abate until 2022. Strategic executives will contend with higher inventory, transportation, and wage costs through operational cost mitigation measures and strategies to improve productivity—including technology and digitalization solutions.
Supply chain disruptions continue. Supply chain bottlenecks continue to depress growth in key economies, while moves toward greater self-sufficiency may create persistent challenges for global supply chains. Strategic businesses will look for opportunities to reshore and simplify supply chains to the biggest extent possible.
Low interest rates and uncertainty will increase corporate debt while also boosting M&A activity. COVID-19 has squeezed profit margins in some industries and sectors, such as travel and retail, and will continue to create attractive opportunities for M&A activity, which continues to surge.
Climate change is a growing risk for the global economy. Extreme weather events are becoming more frequent, causing economic dislocations such as hampered agricultural production, rising food prices, and volatile commodity markets. Pressures will increase for companies to address sustainability goals in their goods and operations.