The pace of Europe, Middle East, and Africa’s (EMEA) recovery in 2021 will depend on governments’ ability to effectively contain COVID-19, reduce social distancing measures, and provide economic support to boost growth. This creates an environment in which businesses are likely to see fluctuations in the EMEA outlook throughout the year, driven by consumer confidence, the spread of COVID-19, and labor market dynamics.

However, we see an upside scenario in which pent-up demand begins to unlock, especially as broader distribution of a vaccine begins, in our assumption, closer to Q2 2021. While the EMEA region will return to pre-COVID economic levels by 2023, companies will find segment and geographic opportunities as soon as 2021 and should invest in spotting and capturing them early. Firms should be systematic in responding to an uncertain and unpredictable operating environment, where factors beyond COVID-19, from political risk to currency volatility and new taxes, will create challenges for companies operating in the region.

EMEA will see a bounce-back in 2021, but demand is likely to remain volatile. Businesses will find opportunities among more resilient segments within most EMEA markets, but overall, companies should expect a somewhat faster recovery in Central and Eastern Europe and Sub-Saharan Africa, followed by the Middle East & North Africa, and Western Europe. We have a higher level of confidence in H2 2021 dynamics, with elevated confidence and sustainable spending across major EMEA markets driven by vaccinations.

Changing pressures on government finances mean higher taxes and/or spending cuts in 2021 are likely. Companies selling to governments will face a complex 2021 environment, as social and health spending dominate government agendas, but selective opportunities in the region remain. All companies should be monitoring for potential tax increases across their EMEA portfolio, as many governments will have to find alternative sources of revenue to plug deficits created in 2021 and reduce rapidly rising debt levels.

Labor market dynamics will drive different paces of recovery of consumer spending. Consumer spending dynamics will be key for understanding the pace of recovery in 2021—any upside in terms of less labor market pressure and/or reduced consumer fear and greater willingness to spend will point toward a potentially faster-than-anticipated recovery, especially in H2 2021. Firms need to utilize scenario planning to be able to respond to quickly changing dynamics among consumers.

Be prepared for volatile and uncertain demand and operating conditions during all of 2021. Even assuming a vaccine is available starting in early 2021, its distribution will be a challenge, and there will be additional outbreaks until the virus is fully contained. Meanwhile, social dissatisfaction is likely to drive unpredictable political and policy decisions, while business and consumer confidence will fluctuate. Ensure your team is fully equipped to deal with this uncertainty and can respond quickly as conditions on the ground change.

Download an executive summary of our 2021 Europe, Middle East, & Africa Outlook for a full breakdown of the global drivers of the region in 2021 and how they impact your business:

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