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- The global economic prospects have improved considerably amid the deployment of COVID-19 vaccines and additional fiscal stimulus announcements.
- UNCTAD, OECD and Fitch have recently revised their global economic growth forecasts for 2021.
- Continued government support seems necessary to drive economic recovery in the period ahead.
The continuing rollout of COVID-19 vaccines worldwide to contain the spread of the pandemic has emerged as a shot in the arm for the global economy.
The recent developments indicate that the world is observing a sooner-than-anticipated revival in terms of economic indicators, like unemployment rate, retail sales and manufacturing activity, amid widespread reopening of economies.
Given the scenario, intergovernmental organisations - Organisation for Economic Co-operation and Development (OECD) and the United Nations Conference on Trade and Development (UNCTAD) - and credit rating agency Fitch Ratings have bolstered their economic growth forecasts for 2021.
The United Nations body UNCTAD has recently raised its global economic growth forecast to 4.7 per cent in 2021 amid a stronger than anticipated revival in the US economy. In the prior forecast announced in September 2020, the UNCTAD projected the growth rate at 4.3 per cent for this year.
The latest revision in growth rate considers a likely increase in the US consumer spending levels on the back of a massive stimulus package and progress in the distribution of coronavirus vaccines.
The report from the UN body estimated a fall of 3.9 per cent in global output in 2020 amid widespread lockdowns triggered by the virus spread. However, the UNCTAD added that the impact could have been worse in the absence of proactive measures taken by central banks to evade financial meltdown.
The organisation foresees lasting economic consequences from COVID-19, which will need the continued support of the government.
In its recently released interim Economic Outlook report, the OECD predicted that the global GDP would rise by 5.6 per cent in 2021 while continuing recovery with 4 per cent growth next year.
In the previous forecast announced in December 2020, the OECD projected global economic growth of 4.2 per cent for 2021 and 3.7 per cent for the next year. Interestingly, the OECD more than doubled the economic growth forecast for the US economy from 3.2 per cent to 6.5 per cent.
The report cited the US stimulus package and the large-scale vaccine rollouts as the key factors driving the global economic forecast. Besides, it highlighted that there are signs that world economies are coping better with measures implemented to suppress the impact of the virus.
As per OECD, COVID-19 vaccines must be deployed faster and across the globe, which will lay the foundation for lasting and prosperous recovery for all.
Despite the promising economic outlook, the organisation also warned that a long-term transition to remote working, decline in business travel, and the improved digital delivery of services could alter the mix of jobs available in the market.
The credit rating agency Fitch Ratings has also revised the global GDP forecast from 5.3 per cent to 6.1 per cent for 2021. In its latest Global Economic Outlook (GEO), Fitch highlighted that the world GDP is anticipated to be 2.5 per cent higher in 2021 relative to the pre-pandemic year of 2019.
The rating agency credited the larger-than-expected fiscal stimulus package announced by the US President as the key driver of this global forecast revision. As per Fitch, the fiscal support had a strong cushioning impact in 2020.
While the pandemic is not yet over, Fitch believes the world has entered the final stage of the economic recession. The credit rating agency stated that the global growth prospects are improving as the vaccination rollout gathers momentum, economies adapt to social distancing, and the fiscal support strengthens.
Notably, the prospects for a global economic recovery have improved considerably over the last few months amid substantial fiscal and monetary support from the policymakers. However, the nature and speed of the ensuing phase of the economic recovery seem uncertain as the risk of new mutations that resist vaccines continues to persist.