The Forward View – Global: April 2021

Uneven recovery set to continue into 2022, as EMs wait for vaccines.

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Overview

  • High frequency indicators continue to point to a recovery in the global economy in early 2021 – despite slowing trends in emerging market manufacturing and the resurgence of COVID-19 in a number of regions (resulting in the reimposition of restrictions). These disruptions to economic activity, along with delays in the widespread administration of COVID-19 vaccinations means that the broad economic recovery will continue into 2022, with above average global growth, before growth slows to the long term average of 3.5% in 2023.
  • Inflation has been trending higher, albeit remaining subdued by historical standards. The US Federal Reserve intends to keep interest rates close to zero until inflation is moderately above 2% “for some time” and the labour market recovers. This will reduce pressure on other central banks to increase rates and we anticipate policy rates to generally remain low over the next two years.
  • Overall advanced economies are expected to record weak growth in Q1, with COVID-19 continuing to cause disruptions. A range of advanced economies have implemented restrictions in recent months – albeit these measures have had less negative impact than those imposed earlier in the pandemic – with businesses and consumers better able to adapt to the environment. Growth is expected to accelerate from Q2 onwards on fiscal stimulus and wider vaccine penetration.
  • Trends differ widely among emerging markets, with EM Asia generally outperforming other regions. In part this reflects the global demand for electronics, with high tech manufacturing countries within Asia recording stronger performance than those that specialise in low value added manufacturing.

For further details, please see The Forward View – Global April 2021