March 11, 2021

The Forward View – Global: March 2021

US fiscal stimulus to add further impetus to global economic recovery.


  • A resurgence in the spread of COVID-19 across many parts of the globe towards the end of 2020 impacted the global recovery but did not derail it. Most countries experienced a rise in GDP in Q4 2020 with some European countries the main exception.
  • While the restrictions put in place over late 2020/early 2021 to combat COVID-19 will also affect Q1 growth, 2021 is shaping up as a strong year. A reduction in COVID-19 cases, vaccines being rolled out, loose monetary policy settings and, particularly in the US, continuing fiscal support will all support growth. In many advanced economies, overall indicators of household and corporate health ended the year in good shape, which will also support the recovery.
  • There was a large fiscal stimulus in the US in late 2020 (over 4% of GDP) and an even larger package (around 9% of GDP) is likely in coming days. This is much larger than we had been assuming, so we have revised up our US forecasts significantly (from 5.0 to 6.0% in 2021). As a share of the global economy (measured in $US terms) the combined value of the two stimulus packages is a notable 3% of global GDP.
  • Bond yields have risen globally, partly on the back of higher growth and inflation expectations. This has negatively impacted equity markets and also seen some rise in volatility. However, overall, financial conditions still appear accommodative and whether central banks chose to respond will depend on how far bond yields rise and why.
  • Overall, we now expect global GDP growth of 6.2% in 2021 (previously 5.8%). For 2022 we still expect 4.6%. With vaccine roll-out still at an early stage in most countries, the risk of another COVID-19 wave cannot be ruled out. The rise in bond yields may also put pressure on some EM economies, and how (and when) governments start to repair their fiscal positions will be important to watch. Inflation concerns are more a medium term risk; for now the major central banks would be happy to see a rise in inflation (currently below target) and will maintain very loose monetary policy settings.

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