Crédito y Caución expects the global economy to grow by 6.2% in 2021
With vaccination campaigns progressing, the global economy is fully recovering from the major economic downturn caused by the COVID-19 pandemic in 2020. According to the analysis released in its latest 'Economic Outlook', Crédito y Caución expects the global GDP growth rate to reach 6.2% in 2021, up from its forecast six months ago. Fiscal stimulus is being partially extended in 2021 and monetary support remains accommodative, despite rising inflationary pressures. Although the economic cost of the pandemic will have to be addressed in the future, the pace of recovery remains on the upside, especially among advanced markets with high vaccination rates.
The credit insurer expects advanced economies to grow by 5.8% in 2021, compensating for the cumulative fall in GDP in 2020. Some of the uncertainty that loomed over the market in 2020 has disappeared. The US maintains a more predictable trade policy and has implemented several fiscal stimulus projects, boosting GDP growth in the US and elsewhere. The outlook for the UK is also better than in early 2020. Consumers are driving the recovery, with strong growth in the hospitality sector, even though growth in trade with the European Union has lagged behind due to Brexit and uncertainties about the pandemic.
COVID-19 infections are on the rise again in several major advanced markets due to the Delta variant. However, the health crisis is less acute than in 2020, as vaccination programmes are preventing higher hospitalisation rates. The Delta variant is a greater threat to emerging markets with lower vaccination rates. Asian markets had the pandemic relatively under control until this variant began to spread in recent months. However, growth prospects for the Asia-Pacific region remain relatively strong. Latin America has one of the highest infection rates in the world but benefits from looser restrictions and a strong recovery in the United States.
These growth projections are based on the assumption that countries will keep the pandemic under control and will be able to effectively contain new outbreaks of the virus. Moreover, the roll-out of vaccines will continue, without supply problems. However, if vaccines are less effective than expected against variants of the virus, restrictions could be re-imposed later this year. This would reduce consumption opportunities and drag on GDP growth in 2021 and 2022.
"It will be a challenge for governments and central banks to find a way out of the pandemic. The prospects for recovery look good thanks to rising consumer demand and fiscal stimulus, but rising inflation indicates that there are supply-side problems that need to be overcome. While we expect inflation to return to normal levels by 2022, high rates remain a downside risk, especially if they trigger a forced tightening of monetary policy that hampers the recovery," explained Atradius chief economist John Lorié.
