Global economy to grow by 6% in 2021, up from its 5.5% forecast in January. Looking further ahead, global GDP for 2022 will be seen increasing by 4.4%, higher than an earlier estimate of 4.2%.
Some Key Points:
- Those who have managed to have a job during the pandemic will have excess saving hence investments will grow.
- Many countries like USA, UK will show market recovery
- Work from home will be adapted post-pandemic too hence software and technology sector will increase
- The number of startups (without the physical office) will increase leading to global employment
- Emotional spending can increase in sectors like clothing, hotel industry, and luxury products
- Despite fossil fuels being the dominant source of electricity generation, we continue to expect that solar PV (Solar Photovoltaics) capacity will grow at rapid rates on the back of growing capacity in the EU, India, and China. If current trends continue, solar PV capacity is on course to surpass natural gas in 2023 and coal in 2024 in the global electricity sector.
- Disruption in the global supply chain also likely to recover with normalcy
- If large numbers of people continue to work remotely, that will reduce long-term demand for office space as well as demand for energy. That, in turn, will mean less investment in office buildings and oil wells. If people continue to shop remotely, then there will be less construction of shopping centers.
- Vaccinations continue to reduce the threat of the virus, thereby enabling more consumers to engage in the kinds of social interaction that boost spending.
China’s growth set to drive global economy in post-pandemic years:
The U.S. and India will be the second and third-biggest contributors to global growth in the period, according to the IMF, with Japan and Germany rounding out the top five.
Global GDP is expected to rise by more than $28 trillion to $122 trillion over that period, after falling $2.8 trillion last year because of the Great Depression.
One reason for the divergence is the faster-than-expected recovery in the U.S. It’s the only large economy where the IMF’s GDP forecast for 2022 is actually higher now than it was before the pandemic.
Joe Biden announced a USD 1.9 Trillion COVID-19 stimulus plan to revive the US economy.
- The relief package was announced with a view to fight against the COVID-19 pandemic.
- This package provided support to small businesses and also provided direct support to american people.
- Due to this, there has been a significant reduction in small businesses failure in the US.
- It includes USD 1,400 in additional stimulus cheques to Americans, an extension for key unemployment programmes.
Disruption in Supply Chain globally:
- There are a number of factors contributing to disruption, including increasing global demand for consumer goods, a shortage of container ships, and air freight capacity.
- Due to the disruption in the supply chain, the recovery of the manufacturing sector is hurting, although Germany is doing exceptionally well.
- The global chip shortage is worsening due to the rising global demand for consumer electronic goods, home appliances, and automobiles. Also, Chinese companies are concerned about the potential impact of future sanctions from the United States.
- The overall supply chain problem is likely to have a negative impact on the global supply of mobile telephones, automobiles, and home appliances, which can lead to an increase in prices. Already, some prices have started rising. Taiwan’s largest supplier of semiconductors says that the global shortage is not likely to be resolved until 2022. Meanwhile, several Taiwanese producers are massively investing to boost capacity.
Push for Green Infrastructure:
- Green Bonds – These bonds are used to finance environmental projects. Currently, their share is less than 5% of the global fixed income market.
- The estimates about green bond issuance are that they are going to increase by over 40% to top half a trillion US Dollars for the first time.
- Environmental, Social, and Governance (ESG) funds will have inflows and they will continue to increase and account for up to 57% of total European mutual funds by 2025.
- The analysis about electricity production from renewables continues to gather momentum, with solar photovoltaic (PV) capacity likely to grow at rapid rates on the back of growing capacity in the EU, India, and China. If current trends continue, solar PV capacity is going to surpass natural gas in 2023 and coal in 2024 in the global electricity sector.
The global economic output seems uncertain. The global economy as a whole should revert to its pre-pandemic level of output by the end of 2021 and expand by around 5% in market exchange rates.
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