Global GDP growth rates in 2021 to depend on development of pandemic
The global economy contracted significantly in 1H2020, declining sharply by -10% yoy in 2Q20 (-3.0% in 1Q20), caused by the Covid-19 pandemic as a result of stringent lockdown and containment measures as well as the unprecedented decline in human mobility globally. In comparison, during the Global Financial Crisis (GFC), global GDP contracted for three quarters in a row but at a smaller magnitude of -1.9% yoy in 1Q09, -1.5% in 2Q09 and -0.5% in 3Q09, with most significant downturns in developed economies like the US, EU and Japan.
Given the magnitude of this current recession, major governments globally implemented aggressive fiscal stimulus packages with commitments over US$11 trillion to fight against waves of COVID-19 outbreaks, leading to an increase in global fiscal deficits by an average of 9% of GDP. In its latest Fiscal Monitor report, the IMF also noted that cumulative global public debt would rise to a record 100% of GDP by end-2020 (83% of GDP in 2019). Given the concerted and coordinated efforts by almost every government around the world to implement economic stimulus packages as well as major central banks adopting ultra-easy monetary policies, the global economy has already shown some signs of recovery in 3Q20, partly attributed also to the easing of containment measures, and reopening of businesses and resumption in household spending. This alleviated some of the earlier concerns that the global economy is at risk of facing a second Great Depression since the 1930s due to prolonged or multiple waves of coronavirus infections in major economies.
IMF projects better global economic prospects in 2021
The International Monetary Fund (IMF), in its October issue of the World Economic Outlook (WEO), anticipates global GDP growth to rebound by 5.2% yoy in 2021, following a sharp contraction of 4.4% estimated for 2020 (+2.8% in 2019). Following a recovery in 3Q20, with smaller declines in GDP growth, IMF anticipates global GDP growth to continue to recover over 2021 on the back of a pickup in economic activity following a scale back in containment measures as well as the low base effect.
Source: Affin Hwang Research - 11 Dec 2020
Created by kltrader | Jan 03, 2023
Created by kltrader | Sep 30, 2022