Global Economics Intelligence Summary

The global economy is steadily recovering from the pandemic, giving rise to demand and disrupted supply chains. The gap between supply and demand is significant, causing a spike in inflation in many emerging and developed economies. While manufacturing and trade have resumed in most economies, personal consumption has fueled much of the recovery. 

What Are The Roadblocks To Economic Rebound?

The GDP growth outlook for 2020-2030 looks strong in all developed and developing economies. The YoY GDP growth in 2021 is projected to be 5.2%. The growth will be slightly slower in mature economies like the US, Japan, and the UK. And, it will be more robust in emerging market economies like China, Russia, and Latin America. 

However, several challenges exist that may hinder the anticipated growth and the global economic revival. Some of these hurdles include:

• Controlling the pandemic remains to be a colossal challenge for many countries. China contained the virus last year, and more than half of the US population has received at least one dose of the approved COVID-19 vaccine. However, the vaccination drive is slower in emerging economies. Only 33.5% of the population in Brazil and 20% in India have received at least one dose. 
• There is still friction in global supply chains and labor markets, inducing inflationary pressure and adversely affecting international trade.
• Government policies can act as another roadblock that might restrict the return to normalcy. Actions like international travel bans, capital controls, and investment prohibitions can affect the free flow of goods, services, money, and people across borders. 
• Central banks may toughen their monetary policy to counter increasing inflation rates, resulting in slow growth. Central banks in Brazil, Turkey, Argentina, and Russia have aggressively increased interest rates, hindering the economic rebound. On the other hand, lenient policies can cause financial instability in economies.

Economic Growth and Improved Employment

The growth of the services sector has already outpaced the manufacturing industry. The services Purchase Managers Index (PMI) reached an all-time high of 59.4 in May 2021. The manufacturing growth also accelerated in all economies except India and Brazil, which remain in a public health crisis.

China's economy is likely to grow 8.5% in 2021, the highest among the developed economies. The US is set to achieve 6.8% growth, and the global growth rate is projected to be 5.6%. 

Economic revival is creating a favorable employment scenario in most countries. The unemployment rates declined to 5% in the US, 5% in China, and 5.2% in Russia. In contrast, unemployment challenges were rising in Brazil (14.7%) and India (11.9%) during March-May. In the Eurozone, the unemployment rates oscillate between 3.4% in the Netherlands and 15.4% in Spain. 

Wrap Up

The economic growth outlook looks positive in developed economies and most emerging economies, barring a few. The growth will likely be more rapid in developing economies than in mature economies. However, specific challenges, such as inflation and tightened international policies, can hinder the economic revival in 2021 and beyond.