Macroeconomy

Raising our forecast for global growth this year

Despite concerns in some emerging countries, vaccination campaigns will increasingly support the global recovery.

Jean-Pierre Durante, Pictet Wealth Management

Raising our forecast for global growth this year

Even though the number of daily covid-19 cases is still increasing globally, the situation is improving in advanced economies. Vaccines are proving effective in protecting against the virus and its variants, and vaccination programmes are gathering pace. GDP growth is likely to be supported by the ongoing economic recovery and unprecedented fiscal stimulus. As a result, we have revised our global GDP growth forecast for 2021 up from 5.7% to 6.0%.

Global industrial activity is now 3% higher than pre-pandemic levels and international trade 4% higher. Manufacturing activity surveys are close to all-time highs. Emerging economies, which had been leading the recovery, are now seeing activity normalise. However, activity indicators like the IHS/Markit Purchasing Manager Index (PMI) are now close to all-time highs and continue to rise thanks notably to new orders, especially in Europe and the US.

At the same time, high-frequency data shows individual mobility has recently deteriorated to 40% below pre-crisis levels as mobility in emerging economies has deteriorated markedly in recent weeks due to the spike in covid-19 cases in India. Air traffic has recovered from its lows but is still 24% below pre-pandemic levels. Nonetheless, we expect to see a significant improvement in mobility in advanced economies in the weeks to come, with several countries progressively easing lockdown restrictions.

The abrupt interruption of the global supply chain caused by the pandemic is still producing waves. Supply shortfalls in some sectors are creating significant increases in producer prices. Huge fiscal stimulus around the world on top of large consumer savings set to be spent once lockdowns measures are eased could create a temporary but significant increase in global inflation.

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