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Stock markets may be on fire, but 75% of business leaders expect a prolonged global recession.

© Paul Hanna/BloombergBusinesses are expected to take a long time to recover from the pandemic.

Business executives are just not feeling it. Economies may be opening up and stock markets are rallying, but business leaders across Canada and the wider world are less confident about their prospects and are hunkering down for a prolonged recession, according to a new survey by Oxford Economics. 

The dim outlook comes as the S&P 500 index rallied above 3,000 points this morning for the first time since March 5. The market has rebounded 34 per cent since it fell to a year-to-date low of 2,237.40 points on March 23.

“We found that business pessimism has continued to rise. More than half (61 per cent) of businesses have become more negative about global growth prospects in the next two years, with just 24 per cent now more positive,” according to the survey, which gauged the response of companies that collectively employ around six million people and have a turnover of US$2 trillion.

Nearly all businesses (89 per cent) expect to be negatively affected by the pandemic, with one-third expecting the effects to be persistent. The proportion of respondents expecting to be very severely affected has halved over the past month to 12 per cent, however.

“This might suggest that fears over the worst outcomes for the global economy have abated over the past month, as some countries have taken tentative steps to ease restrictions and governments and central banks have continued to signal their willingness to support their economies,” the survey noted.

More worryingly, three-quarters of businesses expect the global recession to last longer than Oxford’s own baseline view of two quarters.

“A global recession lasting three quarters remains the most common expectation. But an increasing number of businesses expect a lengthier recession, with almost a quarter (23 per cent) expecting the recession to last longer than four quarters and into 2021 (compared to 15 per cent who felt that way in April),” the survey noted.

Around 45 per cent of the executives surveyed expect a U-shaped recovery, but a significant 23 per cent are also forecasting a W-shaped recovery in which growth weakens as the pandemic returns.

“More businesses are now anticipating an L-shaped recovery (16 per cent, up from 10 per cent), with growth below trend for a protracted period. Just 8 per cent of businesses expect a relatively quick (V-shaped) return of growth to trend,” the survey concluded. 

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