Just as the arrival of the COVID-19 virus determined the course of the global economy of 2020, so the retreat of the virus will dictate the recovery of 2021. Once vulnerable groups have built up immunity, the restrictions can gradually be lifted. This will boost GDP growth rates around the summer of 2021 and take us to pre-corona levels of prosperity by the end of 2021. Thereafter, a period of above-trend growth will begin in which, thanks to stimulus from governments and loose monetary policy, economies will begin the long climb towards their potential levels, according to economists ABN Amro.
Key quotes
“All countries – with the exception of China – are likely to continue muddling their way through alternating relaxations and restrictions until the vaccine makes a sustainable easing of measures possible. We expect the winding down of restrictions to start in Q2 2021. Once approved vaccines with full (rather than emergency) market access start to be broadly rolled out, the relaxations can be accelerated around the summer. […] The economic damage in the fourth quarter of 2020 with a possible spill-over to the first quarter of 2021 is expected to be more limited than in the first wave.”
“With the phasing out of restrictions between the second quarter and the end of 2021 comes the recovery. Immediately after the first easing of restrictions, there will be strong growth figures for a few quarters, if only because of the aforementioned base effects. Nevertheless, we do not expect a so-called V-shaped recovery. This is due to the anticipated spending levels and proposed stimulus measures.”
“We expect both the euroarea, the US and China to grow above trend in 2022. This will gradually bring the level of prosperity closer to the potential level of prosperity, thus narrowing the output gap and reducing the risk of disinflation. We expect about half of the 4% output gap in the US to close in 2022. In the euroarea, we expect it to slow down. By the end of 2022, the euro area’s GDP will still be about 3.5% below trend, after about 4.5% at the end of 2021. For China, our expectation is that 2022 will be a more normal year than for the other economies. In 2021, growth will slow down but remain above trend. For China, 2022 will be mainly driven by a gradual financial risk and debt reduction.”
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