Throughout 2020 and 2021, navigating the pandemic has been an all-consuming endeavour for all sectors. As the pandemic raged, pharma responded with leadership and purpose, managing to deliver a vaccine in record time. However, with the looming energy crisis, supply chain crunch and labour market tightening all coming to a head, the question on most people’s minds is what does the economy hold out for pharma in 2022 and beyond?
Last month, leading economists at the World Bank, the International Monetary Fund, the OECD and the Conference Board released global economic growth forecasts for 2022 through to 2026.
World growth for 2022 is forecast at 3.9%; with growth across all mature economies forecast to be up by 3.9%. The US and China, the main engines of global economic growth are expected to grow at 3.8% and 5.5% respectively.
|Real GDP (average annual) % change||Actual||Actual||Actual||Estimate||Forecast||Forecast||Trend|
|All mature economies||1.8||2||-4.6||5.1||3.9||2.3||1.7|
|All emerging econo||5.7||4.7||-2.1||5.2||4||3.2||3.2|
The pharmaceuticals market is expected to grow, fuelled by new scientific and operational opportunities, as companies rearrange their operations and recover from COVID-19 , which had earlier led to restrictive containment measures involving social distancing, remote working, and the closure of commercial activities that resulted in operational challenges. The market is expected to reach $1700.97 billion in 2025 at a CAGR of 8%.
Among the upside and downside risks identified in the forecast, global supply chain problems, labour issues, and businesses technology investments pause the greatest risks to growth.
The reason supply chain problems are concerning this time round is that, unlike past disruptions (from natural disasters, international trade tensions, cyberattacks, and even, the global pandemic), the current crises appears much harder to resolve.
There is little companies or a single sector can do when its cargo ships are having to wait to unload in goods in ports. The current crisis is compounded by energy price inflation, and the resulting shortages of critical inputs, such as active pharmaceutical ingredients and excipients. This is why this supply shock has no quick fixes, and a rapid return to business as usual does not seem to be on the horizon, anytime soon.
Labour shortages are crucial to growth. The economists believe that to a certain extent, workers have become more selective in the kind of work they’re taking on post-pandemic. We think this argument is overly simplified and the reality is far more complex.
Taking the US as a case study, three million more workers retired than were expected to retire during the pandemic. In part, this was because older workers are at greater risk of being harmed by COVID. But many older workers found that their retirement plans, and the value of their homes, increased significantly in value. On the other hand, younger workers have had more choices for work.
To attract the workers needed, companies are having to pay new workers higher wages and offer better benefit plans. As the young go back to work in 2022, the need to do this will decrease.
Demographic issues, in the longer term, will also contribute to a shortage in workers. The citizenry is aging in the established economies as well as China. To overcome this, businesses are increasingly investing in digital technologies.
However, one economist warned, the decade before the pandemic hit had the slowest growth in productivity in many decades. Nonetheless, in certain industries, technology is clearly replacing humans and that the pandemic has helped accelerate this shift.
While supply chain and labour issues will depress growth, it is important to put this in perspective. Global economies will grow significantly faster than is the norm.
You can read the report in its entirety through this link.
Global Economic Outlook 2022: Global GDP growth forecast (conference-board.org)
Additional reporting by Niall P Hughes