How Businesses Can Thrive Amid Cloudy Outlook for Global Economy

Geopolitics, social unrest, and increased volatility are factors threatening the world's economies as well as businesses of all sizes and industries. However, this scenario cannot be seen in black and white. Instead, there is a gray spectrum regarding what businesses are experiencing and could experience in 2023 amid this landscape. 

According to The Chief Economists Outlook of the OECD, 70 percent of those surveyed believe that some economies are headed for a recession in 2023, an assumption that is consistent with the forecast of the International Monetary Fund (IMF), an institution that forecasts that at least a third of the global economies will fall into a technical recession, defined as two consecutive quarters of GDP contraction.

In Latin America, 2022 has been a year of resisting economic pressures and the IMF forecasts that the region's GDP will grow by 3.5 percent, above the global average. Factors that can be attributed to this growth in some countries is the increase in local production due to rising prices from imported goods.

According to The World Bank, Latin America’s main economies like Brazil and Mexico will grow by 0.8 percent and 1.5 percent, respectively in 2023, while the overall regional GDP will fall by 1.6 percent, mainly due to changes in trade activities between the US, China, and Europe.

Despite this forecast, William Maloney, the World Bank's chief economist for Latin America and the Caribbean, assures that the region is more resilient and has stronger banking systems than it did a couple of decades ago.

This analysis makes me think about the things businesses can do to face economic complexities and nurture that resilience that Maloney talks about.

First of all, we must emphasize the importance of acting quickly. While the pressures facing business leaders may vary by industry and region, it's wise to start making changes and adjustments instead of waiting to see what happens next. This is what economic forecasts are for, to take action before feeling the adverse effects.

The height of the pandemic may have forced many companies to implement some constraining measures. However, experts from the consulting firm Gartner say that now is the time to implement an offensive technology and digital strategy and accelerate the key activities that depend on that strategy.

More than ever, it is vital to highlight the competitive advantages of a business and have a relevant value offering, strengthened with a strong plan focused on the digital field. For example, some processes' automation can significantly reduce costs and improve productivity. 

When talking about the importance of digitizing business processes, it is necessary to highlight the role of electronic commerce. This model has encouraged businesses to access foreign trade more easily. We have seen how more and more small and medium businesses join digital sales; currently, 52 percent of micro, small and medium-sized companies find e-commerce a perfect channel to market their products, according to the UPS study Mipymes Logistics Challenges. And despite the economic challenges, sales are expected to grow by 50 percent, reaching a value of US$7.4 trillion by 2025.

So far, I have emphasized technology and digitization for businesses to be better positioned to meet the challenges of a complex economic landscape. Two more aspects must be added: the first has to do with an analysis of the supply chain, and the second with a change in mentality. 

According to McKinsey, many businesses have seen operational pitfalls in their supply chains, such as over-reliance on certain suppliers, low inventories of critical products, or overloaded production networks. For this reason, it is important to make an assessment that allows a reconfiguration of the current supply chain, since, according to the consultant, carrying out these changes can reduce costs between 4 and 8 percent for businesses.

Finally, business leaders should take a growth-oriented approach. It may sound like a cliché to think that crisis brings opportunities, but it often does, so leaders must have a long-term vision, and not miss out on opportunities to grow the business.

Prioritizing growth shapes a company's behavior, mindset, the risks it takes, and the investment decisions it makes. McKinsey's research highlights that growth-oriented leaders react decisively to short-term frictions that can turn into opportunities, making organizations more resilient and agile to face sudden challenges.

There is no doubt that the last few years have been tumultuous, and businesses that are capable of recognizing opportunities will come out stronger.