- Wide availability of effective treatments and vaccines will facilitate a transition to the post-pandemic economy
- While the COVID-19 virus will stay on, world GDP is projected to increase about 4.6% next year
- The Chinese economy will grow 7.5% in 2021, its highest rate since 2013, while the US economy will start 2021 slowly and accelerate in the second half
- Europe’s 2021 annual growth rates will be below expectations, with the return to pre-pandemic levels not expected until late 2022
After a 4.2% decline in 2020 and enduring its deepest recession in 74 years, the global economy will enter 2021 at a subdued growth rate and accelerate to a brisk pace in the second half, according to a new IHS Markit forecast.
In its analysis, IHS Markit said that while the COVID-19 virus will stay on throughout 2021, world gross domestic product (GDP) is projected to increase about 4.6% next year. This as economies reopen and vaccines become available “to gradually unleash a new wave of spending on travel and services.”
“While the COVID-19 virus will stay with us, effective treatments and vaccines will be widely available to large populations by mid-2021, facilitating a transition to the post-pandemic economy,” the global industry and market analytics and solutions provider predicts.
The analysis also foresees the acceleration of finished goods prices in 2021.
Commodity prices rose sharply in the second half of 2020 as the global economy rebounded, and these cost increases will be pushed downstream in supply chains for the next six to nine months, pressuring margins and leading to higher prices for finished goods in 2021, it said.
“Supply-chain disruptions should slowly be resolved. Goods industries could then see conditions soften even as aggregate demand strengthens.”
Meanwhile, on the prospects of economic powerhouses, the report foretells that mainland China’s economy will accelerate to the strongest growth rate in recent years, but the rebound will wane.
“The expected launch of effective COVID-19 vaccines, pent-up demand, and a low base effect will help the Chinese economy to grow 7.5% in 2021, its highest rate since 2013. After the cyclical rebound, the economy will return to the deceleration path that began in 2012, as productivity growth slowed in response to stalled economic reforms.”
The US economy, on the other hand, will start 2021 slowly and accelerate in the second half.
“The US economy has partially recovered from its worst downturn since the Great Depression. However, a new wave of COVID-19 infections, the possible re-imposition of lockdowns to contain the virus, and waning stimulus from pandemic relief measures enacted in 2020 threaten to undermine growth through early 2021,” said the report.
“Unexpectedly rapid progress on vaccines should promote an acceleration in GDP over the second half of the year.”
In Europe, the report foretells that the region’s 2021 annual growth rates will fall short of market consensus expectations.
After an estimated 7.5% contraction in 2020, eurozone real GDP is projected to rise by about 3.5% in 2021, with the return to pre-pandemic levels not expected until late 2022.
“After a very weak final quarter of 2020, the COVID-19 virus’ prevalence and related containment measures will continue to hinder the recovery early in 2021,” it said.