Five megatrends that will shape economy and society through 2025

12 April 2021 5 min. read
More news on

In a new report, strategists from Kearney has outlined a number of major trends the firm believes are poised to dramatically shape the global economy and society through 2025. Below is a round-up of the five mega-trends from the paper.

Embattled governments

Covid-19, global protests of systemic inequality, climate change, and widespread economic woes ranging from income stratification to unemployment. These are just a few of the issues placing staggering burdens on federal, regional, and city governments throughout the world.

As the pandemic assails governments throughout the world, many leaders are employing fiscal and monetary tools to temper the economic fallout. The scale of the fiscal interventions is impressive, however, over the next five years, governments will have to contend with repayment challenges down the road.

G20 countries 2020 fiscal stimulus packages

Advanced economies may be able to sustain additional debt burdens and low interest rates for some time, but these bills will eventually become due. Emerging markets face more immediate challenges as funds run dry sooner and borrowing opportunities are more limited. Additionally, their currencies are less accepted globally, leaving them with less room to manoeuvre than their more developed counterparts. 

As fiscal deficits persist through 2025, national governments increasingly constrained by stock of debt and fewer economic policy prerogatives will turn to local administrations and the private sector for support to maintain public trust.

Push to national self-sufficiency

The pandemic has served as a wake-up call to national governments on the need for self-sufficiency and resilience in the face of crisis. As governments move to improve their domestic capabilities in key sectors – healthcare, technology, food, energy, and manufacturing – the private sector may find opportunities for increased collaboration with government. Too much government intervention, however, could stifle innovation in the long run.

Government balance as a percentage of GDP, flow of debt

Stranded segments of society

Over the next five years, growing inequality – exacerbated by Covid-19 – will lead to further marginalisation of stranded segments of society, including minorities, low-skilled workers, students, children, working mothers, and others. Reintegrating them will be a tall order in a weak economic environment, but it requires governments and businesses to work together to re-skill and reposition these important groups in society. 

Rise in food insecurity

A global food crisis is on the horizon, with disproportionate downside implications for emerging markets. Food supplies are tightening due to trade restrictions and Covid-19-induced production disruptions, and incomes are falling amid economic turmoil. The five-year outlook suggests the situation will get worse, resulting in changes in the food industry, widening inequality between countries, and depressed productivity overall.

Food insecurity can have wide-ranging (business) implications. Hunger has been linked to stunting, a condition that can come with physical and cognitive issues that last into adulthood. Globally, more than 20 percent of children under five were stunted in 2019. In some parts of Africa and Asia, the combined productivity and economic losses from stunting can reach as high as 11 percent of GDP. 

Percentage of the population experiencing food insecurity

More generally, Chatham House has found that malnutrition in emerging markets can cost companies up to $850 billion in lost productivity. High food prices for example can increase the likelihood of civil unrest, as seen in Chile and Lebanon, where

massive protests over food shortages (and high prices) has led to instability in the operating environment by disrupting business activity and potentially provoking sudden policy changes. 

As of October, global food prices are up 8 percent since the height of the lockdowns in May, and experts say this increase is hitting emerging markets particularly hard.

Industry consolidations, mergers, and acquisitions

Extended lockdowns amid Covid-19 and other pandemic-related dislocations have squeezed the profit margins of many businesses globally, leading to record levels of corporate defaults. This economic shock is poised to result in a wave of mergers and acquisitions (M&A) as stronger companies acquire weakened rivals, technologies, and assets at bargain prices. 

Available private equity capital was at record levels before the COVID19 crisis

Companies across multiple industries will go shopping for competitors over the next five years. In the meantime, with more than $1.5 trillion in capital and a sea of financially weakened targets made available as a result of Covid-19, private equity groups have deployed their record levels of dry powder in the months following the pandemic, making more than 5,500 deals in the first nine months of 2020. 

This trend will persist well into the medium term, driven by stronger companies in sectors benefiting from the pandemic – such as grocers, e-commerce, and digital companies. Of course, big technology companies are also looking to acquire. Between January and May 2020, tech giants such as Alphabet, Amazon, Apple, Facebook, and Microsoft announced their highest number of acquisitions since 2016 (a total of 19). 

Broadly, a wave of M&A will likely result in the realignment of market power in some industries, including healthcare, airlines, grocery, retail, manufacturing, and auto components, which were already among the most oligopolistic industries pre-Covid-19. While emerging regulatory measures—like those in technology—may curb some of the acquisition enthusiasm, the pool of attractive targets across sectors will only grow over the next five years.