The world economy is facing a the start is tougher by 2021 than expected with the increase in coronavirus infections and it takes time to launch vaccinations.
While global growth is still recovering from last year’s recession, it may take longer to ignite and not be as healthy as previously forecast. The World Bank has already shrunk this month forecast at 4% in 2021 and the International Monetary Fund will update its own outlook this week.
GDP forecast 2021
The World Bank predicts that the global economy will grow by 4% this year
Source: World Bank
Double-dip recessions are now expected in Japan the euro area and the United Kingdom, as restrictions on limiting the spread of the virus apply. The registration of cases in the USA is taking over retail spending and employment, prompting the new administration of President Joe Biden to seek an additional $ 1.9 trillion fiscal stimulus.
Only China has managed a V-shaped recovery after containing the disease early, but even there consumers remain cautious, with Beijing partially blocked.
High frequency indicators followed by Bloomberg Economics indicates a worrying start to the year, with advanced economies starting with a weak note and divergent emerging economies.
“This is a reflection of the harsh reality that before the vaccine is widely distributed, a return to normalcy is an unlikely prospect,” said Tom Orlik, chief economist at Bloomberg Economics.
Growth is hindered
Economic activity starts with a very slow start to the year
Source: Bloomberg Economics, Google, Moovitapp.com, German Bureau of Statistics, BloombergNEF, Indeed.com, Shoppertrak.com, Opportunity Insights
It is a strong prospect facing policy makers after $ 12 billion in fiscal support and $ 1 billion in central bank money printing failed to cement a recovery. The Federal Reserve is meeting this week.
Market optimism
Even as the economic outlook darkens as the weeks of 2021 tick, financial markets have continued to draw on optimism from the government stimulus, and the launch of the vaccine will lead to a recovery. Global stock markets have reached a level historical high last week.
Unevenness may occur in comments from global leaders, including Chinese President Xi Jinping, his French counterpart Emmanuel Macron and German Chancellor Angela Merkel and others who will speak at an online event hosted by the World Economic Forum from January 25 to January 29 instead of the regular meeting in Swiss skiing in Davos.
US, UK and European Union deliver vaccines, setting a scenario in which parts of the world end up herd immunity while others lag behind, affecting poorer economies.
“While there is light at the end of the tunnel, there is still a long and difficult road before we go out,” said Erik Nielsen, chief group economist at Unicredit SpA. “As long as the pandemic terrorizes a part of the world, normalcy will not be restored anywhere.”
The optimistic outlook is based on achievement by the authorities vaccinate on a material scale by the middle of the year and neutralize the threat of more transmissible variants of the virus. Ongoing supply a light monetary policy and the hope that governments will not withdraw their support prematurely, as some should after the financial crisis.
With all the strength ahead
China’s share of the global economy is expected to grow at a faster pace
Source: IMF, World Bank, McKinsey & Company
Blockages and other traffic restrictions also appear to have a less harmful economic impact this time than last year, as consumers and businesses have found ways to adapt. And China’s leader in global recovery shows what is possible once the virus is controlled.
“The first quarter will be worse than I thought,” said Shaun Roache, Asia Pacific’s chief economist at S&P Global Ratings in Singapore. “But we see a delayed recovery, not a derailment.”