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The global economy has been pushed and pulled between two opposing forces: the brutal shock of the pandemic and the overwhelming response of both monetary and fiscal economic policies, explained economists at BBVA Research. They see this will continue in 2021. 

Key points:

“The severe recession in the second quarter of the year was followed by a better-than-expected recovery in the third quarter. This recovery was then halted in October as a result of a second wave of the pandemic, which in turn prompted new stimuli. Aside from the increase in the infection rate at the end of the year, there is also now uncertainty surrounding the potential spread of more contagious strains of COVID-19 from their places of origin (mainly the United Kingdom) to the rest of the world, which points to a slow recovery in the short term.”

“Among the positives over the next twelve months will be the disappearance of uncertainty over the Brexit deal, the resilience of the Chinese economy and its global pull in the manufacturing industry, which has been a stabilizing factor in the rest of the world.”

“We will have witnessed a highly volatile economy across 2020 and 2021, with the economy shrinking by an average of 2.6% in 2020 and predicted to grow by an average of 5.3% in 2021 globally, meaning we will still be some way off reaching pre-pandemic activity levels. The recovery is expected to continue strongly in 2022 (global growth of 4.1%), with much less uncertainty surrounding the health situation and with fiscal programs booming, which will be needed to offset the economic destruction of the pandemic.”