The world economy is looking for a tougher start to 2021 than expected when coronavirus infections arise and it will take time to get vaccines.
While global growth is yet to recover sharply from last year’s decline at some point, it may take longer to light up and be less healthy than previously thought. . The World Bank has already this month dropped the forecast to 4% in 2021 and the International Monetary Fund will update its own outlook this week.
A double-dip recession is now expected in Japan, the eurozone and the UK as restrictions are in place to prevent the spread of the virus. Registration issues in the U.S. are slowing sales and hiring spending, prompting President Joe Biden’s new administration to seek an additional $ 1.9 trillion in fiscal value.
Only China has overcome V-shape after the early onset of the disease, but even there consumers are still wary of Beijing being partially locked.
High frequency signals followed by Bloomberg Economics mark a troubled start to the year with advanced economies starting on a weak note and emerging economies.
“That reflects the stark reality that, before the vaccine is widely rolled out, there is an expected return to regularity,” said Tom Orlik, chief economist at Bloomberg Economics.
It is a strong prospect facing policymakers after $ 12 trillion worth of fiscal support and trillions in print central bank money failed to recover. Those from the Federal Reserve will meet this week.
Market optimism
Even as the economic outlook has become darker as the weeks of 2021 have struggled, financial markets have continued to leverage optimistic government stimulus and the spread of the vaccine is moving backwards. Global stocks hit an all-time high last week.
The inequality is likely to be reflected in comments from world leaders including Chinese President Xi Jinping, his French representative Emmanuel Macron and German Chancellor Angela Merkel and others who will speak at an event on held by the World Economic Forum from 25 January to 29 January. instead of his usual meeting in the Swiss ski resort of Davos.
The US, Britain and the European Union are delivering vaccines, setting a situation where some parts of the world reach herd protection while others weaken, especially poorer economies.
The World Health Organization will warn rich countries Monday that their economies could be hurt if they do not help developing countries accelerate immunization programs, the Financial Times reported Sunday, citing a study.
If the distribution of vaccines in poor countries continues their current path, production losses of up to $ 2.4 trillion of their total annual domestic product before the pandemic are due to disruption of trade and supply chains, the WHO says, according to the FT .
“While there is light at the end of the tunnel, we still have a long way to go before we are out,” said Erik Nielsen, chief group economist at Unicredit SpA. “As long as the pandemic is ravaging parts of the world, regularity will not be restored anywhere.”
The optimistic outlook is in line with authorities getting the vaccine out at a substantial rate by the middle of the year and threatening the risk of more widespread variants of the virus. The continued provision of an easy monetary policy and the hope that governments should not withdraw their support too soon should be done as some did after the financial crisis as well.
Barriers and other restrictions on movement appear to be having less of an economic impact this time around than last year as consumers and business have found ways to change. And China’s lead in global excellence is showing what is possible when the virus is controlled.
“The first quarter will be worse than we expected,” said Shaun Roache, Asia Pacific chief economist at S&P Global Ratings in Singapore. “But we are seeing immediate delays, not reversals. ”
