Prospects for the global economy to end-2021
Resurgent spending and loose policies are fuelling demand, but supply strains pose risks and many EMDCs are lagging
Strong economic activity in China and the United States is leading the rebound, with momentum also gathering pace in Europe and many developing countries. However, supply is struggling to keep pace with demand, and dislocation effects plus shortages of some critical goods and workers are raising prices. GDP growth forecasts for 2021 are skewed by the weak base for comparison; higher-frequency indicators will offer a better guide to new activity.
Our judgement
Chinese and US activity should be resilient to near-term shocks and will power global trade. Europe faces more delays and risks but should rebound robustly. Signs of greater appetite for state intervention could help to correct inequalities. Emerging market and developing economies (EMDCs) that keep COVID-19 under control, are well diversified and have scope for policy adjustment will recover faster.