The global economy is forecast to grow at a record speed this year, although the rate of expansion is likely to be significantly uneven across countries.
PricewaterhouseCoopers (PwC) said that is expects the global economy to grow by around 5% in market exchange rates this year, which is the fastest rate recorded in the 21st century.
The forecast is contingent on a successful and speedy deployment of vaccines, and continued accommodative fiscal, monetary and financial conditions in the larger economies of the world.
Pre-COVID-19 levels of output are anticipated by the end of 2021, however, some economies are set to experience a more bumpy recovery than others as the virus mutates and evolves.
“A distinguishing feature of the 'great rebound' is that it will be uneven across different countries, sectors and income levels,” said Barret Kupelian, senior economist at PwC.
“For example, the Chinese economy is already bigger than its pre-pandemic size, but other advanced economies – particularly heavily service-based economies like the UK, France and Spain, or those focused on exporting capital goods, such as Germany and Japan, are unlikely to recover to their pre-crisis levels by the end of 2021.”
In countries like the UK, growing at lower levels of output is projected to push up unemployment rates, with most of the jobs affected likely to be those at the bottom end of the earnings distribution, exacerbating income inequalities.
The Organisation for Economic Co-operation and Development (OECD) predicts an unemployment rate of around 7% in its member states, compared to pre-pandemic levels of around 5%.
PwC also said that it expects the environment to be an important focus this year, with total green bond issuance increasing by over 40% to top half a trillion US dollars for the first time.
Investor appetite for environmental, social and governance (ESG) funds is also predicted to increase again, and could account for up to 57% of total European mutual funds by 2025.
“Once the virus is under control, policymakers’ attention will focus on laying the foundations for sustainable and inclusive growth, with particular focus on creating jobs and pushing the green economy agenda,” Kupelian said.
“Business leaders will therefore have to think about how they can reposition their organisations so that they are better placed to exploit these exciting opportunities. Some of this will also inevitably involve upskilling their existing workforce.”
Image credit: iStock
Author: Chris Seekings