As vaccine rollouts accelerate, we expect GDP growth to hit 5.7% in 2021, the fastest expansion rate since 1973; this is somewhat flattered by the low starting point stemming from the steep decline of 2020.
The policy backdrop remains supportive in both fiscal and monetary terms, but change is likely to slowly begin over the course of the year as countries transition from COVID stimulus measures.
Emerging Markets Outlook
Although set for GDP growth in excess of 6% in 2021, the EM outlook is somewhat muted relative to its own history — reflecting the challenges related to COVID-19 and vaccine deployment.
The robustness of global manufacturing provides a positive tailwind for EM, even if the benefit is not uniform across countries. This will help offset the need of some countries to begin withdrawing monetary and fiscal policy support.
Global Capital Markets
Signs of froth exist in some parts of the economy and financial markets, but in our view they are not widespread enough to derail the powerful economic growth associated with economies reopening with ample policy support.
The most likely path for interest rates continues to be to the upside; however, reflexive investor and central bank behavior is likely to limit the pace of future moves.
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