Vaccination rollouts to drive global economic recovery

The global economy is expected to recover from the pandemic-induced recession but with major divergences in pace, and mostly dependent on how quickly people can be vaccinated and lockdowns ended.

This is the view of economists at Atradius, whose latest report outlines how, with the exception of China, all regions of the world took a severe economic hit in Q2 before a strong rebound as the pandemic temporarily receded. The resurgence of infections in the second wave impeded recovery. Overall, global GDP is expected to have contracted 3.9% in 2020, the trade credit insurer said.

The speedy development of COVID-19 vaccines, the election of Joe Biden as US president and the agreement of a Brexit deal improved the otherwise gloomy picture.

Looking ahead, Atradius forecasts the global economy will grow by 5% in 2021. This means that by the end of the year the economic impact of the crisis on a global level will be wiped out; returning GDP to its 2019 pre-pandemic level. However, while the recession varied in its severity across global regions in 2020, the recovery will be similarly uneven. Emerging Asian countries, led by China and India, will recover much more strongly than the rest of the world. By comparison, Europe and South America will lag behind; only reaching 2019 GDP levels again somewhere deep in 2022, according to the data. The US and Eastern Europe keep the middle ground, restoring GDP levels before 2021 year end.

Meanwhile, global trade surpassed expectations in 2020. While forecasts for a global trade collapse of between 15%-30%, global trade is now expected to have contracted between 7-8% last year, with a similar sized rebound in 2021.

Simon Rockett, head of UK risk underwriting at Atradius, commented: “The 2020 recession has been unique in that GDP and trade have been severely impacted but insolvencies remained low due to the fiscal stimulus and temporary freezing of bankruptcy proceedings in many markets. This however could change dramatically as stimulus is phased out. In the interim, business support remains essential to support both individual firms and wider economies. Cautious credit management including attention to the financial stability of your business and that of your buyers remain paramount.”

Atradius’s forecast anticipates a good pace of vaccinations, resulting in permanent reductions in restrictions by mid-year. However, if progress is slower than expected and social distancing measures continue into H2, businesses may postpone or even cancel investment amid uncertainty which will hamper economic recovery in 2021.

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