Clues from Asia’s Rocky Recovery

If Asia is a proxy for the rest of the world, the post-coronavirus economic return may not be as sharp as many are predicting.

Glimmers of hope are starting to emerge as China recovers from the coronavirus outbreak. Minimal new infections are being reported. Supply chains are coming back online. And this week, for the first time since January, residents of Hubei, the epicenter of the outbreak in China, were granted permission to leave the province.

As the outbreak begins to fade there, however, predictions that China’s economy would return as rapidly as it vanished haven’t panned out. Michael Distefano, Korn Ferry’s president for the Asia Pacific region, says that if Asia is a harbinger for how the virus will play out in Europe, North America, and elsewhere, leaders should prepare for a roller-coaster recovery. “It’s not turning out to be a V in Asia,” says Distefano, referring to the quick drop and rapid rise shape predicted by many economists. “It’s more a U or even a roller-coaster W shape.”

Take China specifically, for example. Even though cases are slowing down in the country, its supply chains are heavily interconnected with Europe, the United States, and other areas of the world where the outbreak is still spreading. “China can’t start its full recovery while demand is suppressed in the West,” says Scott Macfarlane, a senior client partner and global account leader with Korn Ferry.

To be sure, the health and economic recoveries throughout Asia-Pacific region are not moving in tandem and are very much divided. Some countries that did not respond quickly to the virus are projected to face prolonged recoveries while others are restarting faster. “It’s a two-speed situation in Asia, with the health and economic recovery very much uneven,” says Distefano.

Leaders throughout the rest of the world are already preparing for their own roller-coaster recovery. Macfarlane says Korn Ferry clients are preparing for operating in a subdued environment while planning to capitalize on opportunities for growth when they emerge. That means managing expenses while keeping key resources in place. Macfarlane expects organizations to continue dramatically cutting back on flexible spending and nonessential programs. At the same time, however, he expects organizations to keep sales, marketing, and product teams as intact as possible.

The hope is that once the pandemic peaks in Europe and the US and the doom and gloom is gone, the world economy will come alive. “If other countries move faster on the problem and don’t have the same supply chain issues, they might see a V-shaped recovery,” Distefano says. Regardless, while a sharp economic recovery could still materialize, he says leaders should strap in for a roller-coaster ride.