Overview

• The latest available GDP data showed strong growth in both advanced economies and emerging markets in Q2 2021. More recent indicators, such as purchasing manager indices, point to weaker conditions in Q3 –in a large part reflecting the impact of COVID-19 restrictions (particularly in China).
• COVID-19 remains the main risk to our global economic outlook, with emerging market economies more exposed to the risk of outbreaks due to their typically lower vaccination rates than advanced economies. The latest forecasts from the Economist Intelligence Unit suggest that much of Africa and South East Asia will not reach widespread vaccination coverage until 2023.
• Inflationary pressures have increased globally since late 2020 –in part due to supply chain disruptions, shortages of key inputs and rising commodity prices. This is also acting as a brake on the recovery. Although some of these pressures are temporary, some, such as the temporary shortages of semi-conductors, are likely to take some time to resolve. For now, major central banks are remaining on hold. Tapering and, in most cases, eventually ceasing asset purchases, will be the first stages towards normalising monetary policy, but it is likely to be some time before major central banks start to lift policy rates.
• Overall, we have revised down our global forecast to 6.0% for 2021 (from 6.2% in August) –reflecting weaker forecasts for China, India and, to a lesser extent, the US. Our forecast for 2022 is unchanged at 4.6% -with a stronger outlook for China and India offset by a weaker one for the US, Euro-zone and Japan –as is the forecast for 2023, at the long term average of 3.5%.

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