The global economy is poised for a solid rebound this year as vaccines and expansionary policies help repair damage from a pandemic that destroyed more than a quarter of a billion jobs, according to the United Nations Conference on Trade and Development.
Gross domestic product worldwide will rise 4.7 per cent in 2021, the Geneva-based organisation projected, snapping back from the sharpest annual drop in output since World War II. Last year’s contraction in global GDP of 3.9 per cent eliminated an estimated 255 million full-time jobs, “with no region spared”, it said.
Central banks were credited for the swift responses that buffered the financial shock at the beginning of the crisis, moves that Unctad said helped ease liquidity constraints and calm anxious investors.
“Their willingness to keep the monetary spigot open saw financial markets bounce back quickly from the lows of March-April, with many ending the year at an all-time high,” according to the report published on Thursday.
Nations that tackled the Covid-19 pandemic with rapid monetary, fiscal and vaccination programs will likely see the strongest economic growth this year, according to Unctad’s report. Healthy recoveries are expected in both developing and developed economies.
China's economy will expand 8.1 per cent as a result of Beijing's continued success in containing the virus and the acceleration of its domestic vaccination program. India and South Korea will also see healthy recoveries from contractions, while Brazil's return to growth is projected to lag other developing nations.
Relief package
US GDP will likely grow by 4.5 per cent, propelled by the government’s $1.9 trillion relief package and the Federal Reserve’s determination to keep interest rates at historic lows. Unctad also warned of downside risks and the emergence of a “Covid bubble” in the US stock market that may create the “risk of a financial crash”.
The euro area will likely see 4 per cent GDP growth in 2021, Unctad said. But European nations may struggle early in the year depending on how fiscal responses and vaccination programs evolve. The UK’s rapid rollout of the vaccine will help Britain’s GDP grow by 4.4 per cent this year after a nearly 10 per cent plunge in 2020.
Longer term, though, the UN agency cautioned about status-quo policies like those that exacerbate inequalities and foster financial instability. “It seems reasonable to assume that, unless there is a determined shift in policy direction, the world economy will take more than a decade to catch up with its pre-pandemic trend,” the report stated. – Bloomberg
