July 15, 2021

The Forward View – Global: July 2021

Advanced economies open up again; can vaccines ensure it’s for the last time?


  • Financial condition indices continue to point to accommodative policies –with fiscal and monetary authorities in most jurisdictions favouring growth, despite rising inflationary pressures. These pressures reflect rising commodity prices along with some supply and labour shortages, with some of these factors likely to be temporary. As a result, we continue to expect major central banks to keep policy rates low, with initial adjustments to policy settings to be in the form of asset purchase tapering.
  • Relatively strong global business survey readings (albeit off the peaks in May) are skewed towards the opening-up advanced economies. Consumption indicators have improved in line with easing restrictions in the United States and Europe, while Japan is the notable exception (with retail sales well down recently).
  • In contrast, surveys for EMs have softened, reflecting China’s comparatively rapid recovery from COVID-19 –meaning that there is no longer the opportunity for more rapid catchup growth –but also the impact of fresh outbreaks of the virus in a range of emerging markets.
  • COVID-19 remains the most significant risk to our global outlook. Much of the emerging world remains vulnerable to additional waves of the pandemic due to low vaccination rates (largely the result of poor access to the vaccines) and this is unlikely to be resolved before late 2022 at the earliest. There is some growing concern that newer COVID-19 variants (such as the Delta and Lambda strains) appear to be more easily transmitted –potentially requiring higher than previously thought rates of vaccination to achieve herd immunity.

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