BRANDS
What Next For Brands As Global Economy Slows Down ?
By Enock Wandera
The International Monetary Fund ( IMF ) Global Economic Outlook 2022 report revealed a slow-down in the global economy in the second quarter of this year , owing to downturns in China and Russia , and reduced consumer spending powers in the United States ( US ). Global downturns also referred to as recessions are widespread and sustained contractions of economic activity marked by declines in the gross domestic product of many economies .
The report outlook published in April and updated in July cites several shocks that have hit the world economy that is already bearing the brunt of the Covid-19 pandemic . Some of these include the lockdowns and negative spillovers from the ongoing invasion of Ukraine by Russia , including the Black Sea blockade that have led to high inflation rates across the world especially in the US , China , and major European economies .
The downturn in the world ’ s three largest economies - the US , China , and the Euro area - have important consequences for the global outlook . According to the report growth slows from last year ’ s 6.1 percent to 3.2 percent this year and 2.9 percent next year , downgrades of 0.4 and 0.7 percentage points from April .
In the US , the slowdown is manifested in the reduced household purchasing power and tighter monetary policy will drive growth down to 2.3 percent this year and 1 percent next year . In China , further lockdowns , and the deepening real estate crisis pushed growth down to 3.3 percent this year - the slowest in more than four decades , excluding the pandemic . And in the Euro area , growth is revised down to 2.6 percent this year and 1.2 percent in 2023 , reflecting spillovers from the war in Ukraine and tighter monetary policy .
The IMF report shows that the outlooks for countries in the Middle East and Central Asia and sub-Saharan Africa remain on average unchanged or positive , reflecting the effects of elevated fossil fuel and metal prices for some commodity-exporting countries .
The rising prices of essential commodities such as food and fuel have caused widespread hardship , famine , and unrest . For the case of sub-Saharan Africa , the situation has been further worsened by
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The advertising budget makes up a big part of the overall marketing budget , meaning that when marketing gets cut in a lot of companies during a recession , the ad market becomes less crowded . The prices of ad spaces also start falling , which means an excellent opportunity to increase share of voice . drought ravaging several parts of the region especially in the Horn of Africa as climate change take its toll .
Brands have found themselves in tight situations in the midst of this global stalling of growth , which is hard to predict its end . It is therefore important to learn from history and understand how your company or brand can be affected by the unprecedented moment to help ensure it doesn ’ t become a casualty .
According to Investopedia , recessions always result in sales and profits declines be it for big or small companies . Slowdowns in the global economy also led to limited credit access , slow collections , and business bankruptcies . Although the effects are the same for large and small businesses , the latter are at a more precarious state due to their lack of scale which exposes them to failure .
In times of recession , the market also witnesses changing consumer behaviors which companies must understand and align their brands to . The wave of bad economic news is undoubtedly eroding confidence and likely buying power , driving consumers to adjust their behavior .
Many taking up a variety of steps to cope with the new reality where prices are rising more quickly than incomes making it difficult for many to afford basic commodities .
Studies show that many are preferring discounted stores with Bloomberg recent report showing that 50 % of consumers are responding to inflation by pursuing promotions more aggressively .
According to the Harvard Business
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