Atradius predicts fast recovery
With vaccination campaigns ongoing, trade credit insurer Atradius (www.atradius.co.uk) is reporting that the global economy is recovering fully from the major economic downturn in 2020 caused by the Covid-19 pandemic.
According to its new Economic Outlook, Atradius economists forecast a 2021 growth rate of 6.2%, higher than was expected six months ago, with advanced economies expecting to grow 5.8% in 2021 more than making up for the cumulative drop in GDP in 2020. However, most economies have yet to fully reopened and some fiscal support is being extended this year despite rising inflationary pressures.
“It will be a challenge for governments and central banks to navigate a path out of the pandemic. The recovery prospects look good amid rising consumer demand and fiscal stimulus, but rising inflation indicates there are supply-side issues that need to be overcome,” explains John Lorié, Chief Economist at Atradius. “While we expect inflation to revert back to normal levels in 2022, high inflation remains a downside risk, especially if it triggers a forced tightening of monetary policy that would hamper the recovery.”
Some of the uncertainty that hung over the market last year has disappeared. In the United States, the Biden administration has implemented several fiscal stimulus bills, boosting GDP growth in the US and elsewhere. The outlook for the United Kingdom is also substantially brighter than it was at the beginning of 2020. Consumers are driving the recovery in the UK, with strong growth in the hospitality sectors, despite trade growth with the EU falling behind on Brexit and pandemic uncertainties.
Covid-19 infections are rising again in a number of major advanced markets due to the more transmissible Delta variant. However, the health crisis is less acute than it was in 2020, as vaccination programmes are preventing higher hospitalization rates. Emerging markets in Asia had the pandemic relatively well under control, until the Delta variant started to spread in recent months. Despite this, Atradius reports growth prospects for the region remain relatively strong. Latin America has among the highest infection rates in the world, but benefits from looser restrictions and a robust US recovery.
The current forecasts from Atradius assume governments will maintain their grips on the pandemic and will be able to effectively contain new surges of the virus alongside continued vaccine rollouts, unhampered by supply constraints. However, if vaccines are less effective against new virus variants like Delta than expected, governments may have to re-impose restrictions later this year. This creates a downside risk to positive forecasts and would reduce consumption opportunities and drag on GDP growth in 2021 and 2022 reports Atradius.