The Global Economy is now projected to expand by 5.4% in 2021, reflecting an upward revision of forecasts earlier in the year and after a sharp contraction of 3.6% in 2020 largely due to the coronavirus pandemic.
The United Nations World Economic Situation and Prospects mid-year report also finds that amid rapid vaccination and continued fiscal and monetary support, the world’s largest economies of the United States and China are well set on a path to recovery.
The global average expansion of 5.4% is largely driven by the highest growth forecast for the United States in more than 50 years at 6.2% this year; and China’s expansion expected in the 8.2% range for 2021.
UN Economist and the lead author of the mid-year report, Hamid Rashid says: “The Global outlook that we have, this is largely underpinned by the highest than expected growth performance of the United States and China – the two largest economies. They are doing much better than the rest of the world. I think that is quite a positive sign but it’s not exactly where we can be complicit about the global economic outlook because other economies are not doing as well.”
A reference to vaccine inequity between countries and regions that the UN believes is posing a significant risk to an already uneven and fragile global recovery was highlighted, particularly in developing regions struggling to meet vaccine needs on the ground.
“The weak spots – we see India, Brazil, South Africa and many other developing countries – we expect them to grow but the growth rate, it will still not be sufficient to catch up and to off-set the loses that they had in 2020, says Rashid.
“One point that I would like to highlight here is that in the past, the average growth rate of the developing countries would be higher than the global average. But now we see the average growth rate of the developing countries and many developing regions will be lower than the global average and that’s concerning because we would expect countries with the lower economic base to grow faster but that is not happening given the effect of the pandemic and ongoing pandemic for many countries and regions.”
African economies underperforming
Africa’s largest economies continue to underperform, with Nigeria expected to reach just 1.8% growth and South Africa 2.8% in 2021 as both countries struggle to meet vaccine demand, as Rashid explains.
“The recovery that we are talking about right now is both very uneven and also very uncertain and we should also not be complicit about the aggregate numbers which I mentioned earlier on, about 5.4% global growth which in normal times would be considered a very fine growth rate but at this time of the crisis, it is barely off-setting the loses that we had last year.”
The report raising concerns that despite increased levels of liquidity to shore up economies suffering through a pandemic, investment has not increased sufficiently with risks on the downside looming large.
“We saw a massive injection of liquidity which was of course much needed to avoid a complete meltdown of the global economy, but that has not led to a massive increase in investments – liquidity mostly went to asset price bubbles or…we see the stock markets, massive surges in stock markets, prices globally and that is creating some financial stability risk worldwide and we have to be vigilant about that risk as that can also derail the recovery efforts going forward,” says Rashid.
The pandemic has pushed an estimated 114 million people into extreme poverty, the majority of women and girls, with the report urging targeted policies and support measures to address the disproportionate impacts on this demographic.