Featured image by Peshkova
There’s no doubt that the global economy took a hit through 2020. In fact, the UK recorded a contraction of 9.9%, the country’s largest recorded contraction since the Great Frost of 1709.
However, while economic growth remains sluggish and inconsistent, there are tentative signs that the world’s markets are on the cusp of a long-term recovery.
We explore this further in the article below. Additionally, we ask what the experts have to say about the future of the global economy.
RELATED ARTICLE: GOING INTERNATIONAL? THREE IDEAS TO UNDERSTAND
What’s the Outlook for the Global Market in 2021?
Despite a marked projection in western countries (and indeed across the globe) through 2020, the International Monetary Fund (IMF) has outlined a much more positive outlook for this year.
Released in April 2021, the IMF’s report predicted that the global economy will recover from the coronavirus pandemic consistently through 2021 and 2022. Moreover, the organization anticipated GDP growth of 6% and 4.4% forecast respectively.
Growth is almost certain to accelerate beyond the 5.6% mark this year. It’s interesting to note that this is based primarily on the growing strength of major economies like China and the US.
In fact, the IMF expects these nations to contribute approximately one-quarter of global growth through 2021. Meanwhile, they forecast the UK’s GDP to grow by an impressive 6.8% during the same period. Interestingly, this forecast has seen an upward revision of 1.1 percentage points since May’s strong outlook. Additionally, the UK will also see a 5.3% uptick the following year.
RELATED ARTICLE: 5 KEY POINTS FOR EXPANDING YOUR BUSINESS GLOBALLY
What’s the Truth Behind These Numbers?
While growth appears to be returning at first glance, it’s important to provide a little more context.
For example, market watchers expect that this year’s pickup and the projected expansion for 2022 will be a hefty 3.2% lower than pre-pandemic forecasts. Meanwhile, per capita GDP among many emerging and frontier economies is also considerably lower than it was prior to the global pandemic.
There’s no doubt that the gap between developed and emerging economies continues to widen. What’s more, the composition of global growth has changed markedly despite the overall percentages remaining largely unchanged.
More specifically, growth prospects for advanced economies have improved by 0.5 percentage points through 2021 to date. This is offset by a significant downward revision for emerging markets and developing alternatives.
This trend should continue through 2021, too. In fact, developed economies will be the primary drivers of global growth of 4.9%. However, the contraction of developing alternatives will actually hamper global growth.
What Do the Experts Say About the Global Economy?
These figures cast doubt over the performance of emerging economies. They also highlight that a great deal of work needs to be done before the world’s economy returns to pre-pandemic growth levels.
This explains why the experts are relatively tentative about the current economic climate. For example, Oanda trading analyst Craig Erlam highlights the uncertainty of investors and businesses alike.
“There looks to me to be a lot of underlying optimism in the markets,” he stated, “despite the fact that the coming months will no doubt throw up some nasty surprises.” He also went on to say that businesses are already a little nervous about what the end of the year will bring. It’s easy to understand why when you delve beneath the headline figures.
We’ll all have to remain watchful for the foreseeable future, of course. But we can least celebrate the fact that GDP growth has returned to the leading economies across the globe.
RELATED ARTICLE: WANT BUSINESS GROWTH? LET YOUR CUSTOMERS TELL YOU HOW