Our macro forecasts haven’t changed much this round. We’ve made incremental upgrades to several developed markets (US, Japan, Canada), small downgrades to others (UK, eurozone), and some downgrades to emerging markets ex-China. New IMF estimates have raised advanced economies’ weight in global GDP (measured at PPP exchange rates) by about 3 percentage points, and reduced the weight of developing economies by the same amount. The combination of all these factors lowered the 2020 GDP growth slightly (now at -3.5%) while projections for 2021 have been raised a little (now at 5.1%). It is worth noting that all things equal, the IMF weight changes imply a marginally lower trend growth for world GDP going forward (PP weighted).
The lack of big forecast changes does not mean we/ve become complacent…on the contrary! We had been far out at the optimistic end of consensus six months ago but we now find ourselves pondering not only what will come after the big 2021 rebound, but also what sort of volatility may lie underneath that headline figure. While the crisis part of the relay recovery might soon be over thanks to imminent vaccine deployment, the process of economic healing will take a lot longer. As part of that process, there will come a time for yet another transition, when economies around the world will need to revert to “autonomous growth”. As fiscal and monetary stimulus dwindles, will underlying economic momentum be strong enough to ensure a smooth transition? This is rarely an easy process to undergo so we are watching for signs of vulnerabilities and bubbling volatility.
And so, we close the year recognizing the impressive resilience which the global economy has displayed in 2020 under utterly unprecedented circumstances. We look forward to a much better 2021 when global growth should rebound to a decade high. But we also expect that resilience to be retested at times. There is no room for complacency!
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