Global economic outlook for 2021

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Rashid A Mughal

YEAR 2020 has been a year of disaster for the global economy. All the predictions and forecasts made in January 2020 proved to be a wishful thinking. Covid-19 wrecked the entire economic system throughout the world and jolted the major economic powers — USA, China, Europe and played havoc with the emerging markets and developing countries. The IMF and World Bank revised their forecasts four times in 2020 as Covid-19 continued its ruthless and deadly journey from East to West and North to South with a million and half deaths, so far and the numbers rising exponentially every day. Under these horrifying circumstances the economic growth and recovery in 2021 is expected to be low, slow and timid.
However ,OECD has some good news as according to it “The global economy will gain momentum over the coming two years, with global GDP at pre-pandemic levels by the end of 2021. After a sharp decline this year, global GDP is projected to rise by around 4.2% in 2021 and a further 3.7% in 2022,” the report said. The latest OECD economic outlook report, however, revised its global economy shrinkage forecast to 4.2%, down from 4.5% in September. It highlighted that for the first time since the pandemic began, there is hope for the future due to news of effective vaccines, but the near-term outlook remains very uncertain. The organization warned that governments will have to continue using their policy instruments actively, with better targeting to help those hardest hit by the pandemic.
The report projected that the recovery will not be equal across countries. For instance, China, which started recovering earlier, is expected to grow strongly with 8% in 2021, while OECD economies will rebound, growing 3.3%. China is the only country among OECD members that saw growth in 2020, with 1.8%. The contribution of Europe and North America to global growth will remain smaller than their weight in the world economy. The euro zone GDP is expected to rise 3.6%, while the US is set to rise 3.2% in 2021 and 3.3% in 2021. Notably, the UK is one of the countries which suffered the steepest GDP drop in 2020, with 11.2%. The country is predicted to recover in 2021 with a GDP increase of 4.2%. In report, contraction for the Turkish economy, which was 2.9% in Sept, was reduced to 1.3% for 2020 . The growth forecast of Turkish economy in 2021 was also reduced to 2.9%, which was estimated 3.9% in September, while the OECD estimated Turkey will grow 3.2% in 2022.
Morgan Stanley projects strong global GDP growth of 6.4% for 2021—led first by emerging markets, followed by reopening economies in the U.S. and Europe—in a macro outlook that diverges from the consensus. Rising COVID-19 case numbers in the U.S. and Europe make it difficult right now to envision a return to normal. U.S. GDP growth is expected to hit 5.3% in 2021, Goldman said-above consensus estimates of 3.8%. The firm anticipates that the unemployment rate will drop to 5.3% at the end of next year, down from 6.7% in November and a record 14.7% in April,2020, the highest level since the Great Depression.
Though the jobless rate is still high, it’s been dropping steadily since peaking in April 2020. And if that trend continues, more jobs could open up in 2021. Still, we can’t count on the global economy staging a full recovery in 2021 — especially not in the first part of the year. The coronavirus pandemic has done a number on the U.S. economy. Not only has it cost millions of Americans their jobs, but it has forced thousands of small businesses to permanently shut down, thereby hurting communities and contributing to the general unemployment crisis. And while both the stock and housing markets have performed well this year, the general economy is still worlds away from a complete recovery. So no miracles should be expected in 2021.
But will things get better in 2021? Without a crystal ball, it’s impossible to tell. Right now, COVID-19 cases are still popping up at an alarming rate, and hospital systems throughout the country are finding themselves overwhelmed. Meanwhile, counties around the nation are imposing restrictions in an attempt to curb the spread of the virus, and while those may help from a public health perspective, from an economic one, they can be devastating.
There’s some good news, however. First, there are a number of promising coronavirus vaccines in the pipeline that may be available to the general public as early as April 2021. Already the Vaccination for front line workers, doctors, nurses, hospital staff and people aged 70 plus, has started. If enough people get vaccinated, it could help quell the outbreak. Still, we can’t count on the economy staging a full recovery in 2021 — especially not in the first part of the year. But one thing we do know is that the start of 2021 is likely to be the same rocky continuation of 2020, and while there is reason to think things will improve, that could take months. As such, here are a few moves to make in case the economy doesn’t end up looking much better by end of next year.
Hopefully, jobs will become more plentiful in the coming year, not less. But you never know what impact the recession will have, so a good bet is to boost your emergency fund if you have spare cash in your current paychecks. In fact, at a minimum, you should aim for three months’ worth of living expenses in savings, but if you can do better, you’ll buy yourself even more protection in light of the economic uncertainty that abounds. Debt can be dangerous at any time, but if you lose your job or see your income take a hit, it could be catastrophic. Unless a true emergency arises that your income and savings can’t cover, make it a point to avoid debt until the economy is more stable.
Given the way the coronavirus has been spreading, now may not be the best time to go out and sign up to work the cash register at your local supermarket or wait tables at a nearby restaurant. But if you’re able to find a secondary gig to do on the side from the comfort of home, or in a manner that’s not hazardous to your health, you’ll buy yourself some financial security as we head into an iffy time. Say you’re able to work as a web developer from home a few nights a week or walk other people’s dogs while they’re out of town. If your hours at your main job are cut in the New Year, you’ll have your side gig to fall back on. And having that income stream at your disposal could also help you build a healthier savings account balance while steering clear of debt. While there is reason to believe the economy will improve in 2021, but whether it will recover fully is the big question. Much will depend on how well the pandemic is managed and what aid, if any, is finally delivered to the public in the form of a relief bill or financial assistance. While it’s always good to hope for the best, it’s important to be realistic about the fact that the global economy’s recovery may be prolonged. Prepare for that possibility so you can minimize your own financial stress during what’s apt to be another interesting year.
— The writer is former DG (Emigration) and consultant ILO, IOM.