With economic activities gaining traction along with progress in COVID-19 vaccination drives, GlobalData, a leading data and analytics company, has revised its 2021 global GDP growth rate forecast from 4.87% on 15 February 2021 to 6.14% on 21 June 2021.
Emerging and developing economies’ growth is forecasted at 6.26% in 2021, with robust pickup in major economies, such as India and China. In many other developing countries, vaccination delays and premature withdrawal of fiscal support is likely to dampen the growth outlook. On the other hand, advanced economies are forecasted to witness 5.15% growth in 2021 due to strengthening domestic and external demand.
Gargi Rao, Economic Analyst at GlobalData, comments: “Easing lockdown measures, progress in vaccination drives, easing of restrictions on cross-border movement and trade agreements are all expected to drive global economic growth in 2021. However, daunting challenges in the form of rising inequality within countries, rising inflation rate along with high debt levels and crippled health sectors could hinder the recovery process.”
Among advanced economies, European nations will lead economic recovery for 2021. According to GlobalData, the UK is set to grow at the fastest pace of 6.77% in 2021, followed by France (5.84%) and Germany (3.46%). The US is projected to grow by 6.4% during the year, which is the fastest growth in more than two decades. Meanwhile, Japan’s growth has been revised downward due to frequent lockdowns and loss of business revenue.
Despite the intense second wave of infections, India is expected to remain the fastest growing major economy with a growth forecast of 9.4% in 2021, followed by China (8.61%). Other emerging economies such as Turkey, Philippines, Indonesia, and Malaysia will register more than 5% growth in 2021.
Ms Rao explains: “Green shoots of recovery in key macroeconomic indicators in both developed and emerging economies offers hope for a brighter H2 2021. However, the possibility of a new variant emerging that challenges the effectiveness of the vaccines, such as the Delta variant, poses a significant risk to economic recovery.”
Index of industrial production (IIP) growth in the US increased by an average of 8.9% year-over-year (YoY) during March and April 2021, after recording a contraction for the last 18 months. In Japan IIP grew at an average of 7.5% during the same period, following consecutive contracting for the last 25 months. India’s IIP also grew by 22.3% in March 2021 after contraction for the last 12 months.
Meanwhile, many developing countries are unable to make substantial progress in vaccine deployment due to less policy capacity to support economic activity compared to advanced economies. Moreover, the spread of more contagious variants of the virus across developing economies have raised concerns.
Ms Rao concludes: “As global economic recovery gains traction among advanced and emerging economies, authorities can prioritize policies that facilitate smooth transition of labor across sectors, while also protecting the vulnerable, reducing trade costs and expanding access to digital connectivity. Governments need to continue fiscal and monetary support to aid more equitable vaccine deployment and embark on a sustainable green growth strategy.”
