Global economy threatened by COVID-19 resurgence
- 27 January 2021
There is a high risk of a resurgence in COVID-19 infections derailing the world economy this year, according to a firm majority of economists in a Reuters poll, who forecast global GDP would reach pre-pandemic levels within two years, APA reports.
That threat, flagged by analysts who have largely been too optimistic about recovery prospects, comes despite world stocks adding $33 trillion in value from March lows, lifted by stimulus overflows, near-zero interest rates and COVID-19 vaccine rollouts.
Reuters polls of around 500 economists across Asia, Europe and the Americas revealed modest downgrades or no change to growth outlooks compared with previous surveys, as well as tamer inflation views across most countries.
Economists have priced-in a COVID-19 resurgence as nearly two-thirds of analysts - or 95 of 155 - who responded to an extra question said there was a high risk that another wave of infections derails the global economy, including eight who said that risk was very high.
“It is difficult to overstate the importance of the coming months for the global economy and public health. As vaccine rollouts begin the world over, we are racing against time to head off the impact of potentially more contagious strains of the coronavirus,” said Aditya Bhave, global economist at BofA.
“The biggest downside risk to the global economy is that vaccines prove to be ineffective against the new mutations. In all, the emergence of a vaccine-resistant, dominant strain could result in a lost quarter for the global economy.”
Global growth was forecast to clock 5.3% this year in the Jan. 7-26 poll, unchanged from three months ago, after shrinking 3.9% last year, with the range of forecasts showing both higher highs and higher lows. Amongst common contributors, about 60% downgraded their 2021 outlook.
The 2022 consensus showed a 4% expansion, higher than the 3.5% expected previously. Those forecasts were based on expectations for accommodative monetary policies, with no major correction in global financial markets after years of low sovereign bond yields and soaring stock prices.
They were lower than the International Monetary Fund’s forecasts of 5.5% for 2021 and 4.1% for next year.
“Major vaccine breakthroughs in November and December have lowered uncertainty and raised hopes that life could become more normal again at some point in the next 12 months,” noted Janet Henry, global chief economist at HSBC.