Faster, higher, more varied

Global GDP will grow 5.6% this year and 4.3% next year, but the recovery will be uneven. In several countries, primarily the United States and China, growth will be sharp, and the euro area will recover at a slower and almost equal pace, the World Bank predicts. Developing countries, with the exception of China, will face additional risks, primarily accelerating inflation and the emergence of debt problems.

The global economy is recovering, but extremely unevenly, according to a new World Bank report. The organization expects that the combined economic growth in the world this year will be 5.6% – this is the strongest recovery from a recession in 80 years (last year, global GDP fell by 3.5%). By 2022, when global GDP growth slows to 4.3%, the indicator will still lag by about 2% from pre-pandemic forecasts, 90% of developed economies will exceed it, but among developing countries, they will be only a third. At the same time, the WB notes significant risks for the implementation of such a forecast, associated with new waves (provoked, for example, by new strains of the virus) and uneven access to vaccines.

In developed economies, growth will be 5.4% this year (plus 2.1 percentage points over the previous forecast) and 4% in 2022 (plus 0.5 percentage points). Including in USA Against the background of the approval of the anti-crisis aid package and plans to increase government spending, GDP growth will accelerate to 6.8%, but next year its growth will slow down to 4.2% (and in 2023 – to 2.3%). In the euro area recovery will be more moderate and with inverse dynamics – by 4.2% this year and 4.4% next. Fastest Recovery Expected Among Developing Countries in China – 8.5% in 2021, slowing down to 5.4% in 2022. In Russia growth, according to the World Bank, will amount to 3.2% in both years (plus 0.6 p.p. and 0.2 p.p. to the previous forecast), in Turkey – 5% and 4.5%, in brazil – 4.5% and 2.5%, in Saudi Arabia – 2.4% and 3.3% (the WB proceeds from the assumption that the average oil price this year will be $ 50.3 per barrel).

The acceleration of global inflation will continue until the end of this year, but in most countries it will remain within the target corridors, the World Bank believes.

One of the factors causing prices to rise is a sharp acceleration in the cost of raw materialswhile in developing countries (the main suppliers of commodities) the resulting inflation will limit the ability of central banks to support the economy. Another risk for many countries is increase in debt burden, it can undermine their financial stability, although so far financial conditions, despite a slight increase in the required yield on US government bonds, remain favorable, the bank notes. According to the Institute of International Finance (IIF), on average, developing countries roughly doubled their fiscal deficits in the past year – due to the decline in tax revenues and increased spending on aid to their economies.

What the OECD Macro Forecast says for 2021-2022

As a reminder, the SPIEF participants last week discussed the rise in inflation in the context of the risks of transition to stagflation – a simultaneous combination of stagnation and rising prices – and noted that the development of the situation depends on how stable the trend towards increasing inflation will be. Recall that in the euro area in April, the consumer price growth rate reached 2%, which was extremely difficult to imagine before the pandemic, and in the USA it even jumped to 4.2%.

Tatiana Edovina