November 11, 2021

The Forward View – Global: November 2021

Supply side continues to constrain activity, driving inflation higher.


  • We now forecast the global economy to grow by 5.7% in 2021 (down from 5.9% previously) – albeit this would still be the strongest growth rate since 1973. The weaker outlook for China was the key driver of this downgrade, along with more modest cuts to the United States and Japanese forecasts. Our forecasts for 2022 and 2023 are unchanged – at 4.5% and 3.5% respectively – the latter being in line with the long term average growth rate for the global economy.
  • Risks to our near term forecasts have increased. COVID-19 remains the key risk, particularly in emerging markets, where vaccination rates are generally lower, leaving these economies more exposed to additional outbreaks (and the associated downturns in activity). In addition, supply chain bottlenecks – including in container shipping – continue to constrain economic activity globally. Electricity shortages in China (which could worsen during winter) add additional risk.
  • Inflationary pressures continue – in particular producer prices rose by around 12.8% yoy in September, reflecting a broad range of factors, including the strength of commodity prices, shortages of key inputs, labour and energy along with disruptions to shipping (leading to surging freight rates). Consumer price inflation has also risen notably. Major central banks continue to identify these factors as transitory.
  • Despite these pressures, central bank policy rates remain well below pre-COVID-19 levels, with a few emerging markets (led by Brazil, Russia and Mexico) lifting rates. That said, the market expectations around the timing of advanced economy rate increases have moved forward in recent months (with Norway’s Norges Bank and the Reserve Bank of New Zealand having already lifted rates in recent months) – albeit the Bank of England surprised markets by remaining on hold in November.

For further details, please see The Forward View – Global (November 2021)