Global economy expected to revive in 2021 due to vaccine rollout but addressing unemployment and income inequality remain the need of the hour for poorer countries, finds GlobalData
Even though GlobalData forecasts for 2020 expected a 3.8% contraction in the global economy, the implementation of mass COVID-19 vaccinations programs should set the globe towards recovery in 2021. The company has, therefore, revised its global economic growth forecast upward for 2021 to 5.31%.
Bindi Patel, Economic Research Analyst at GlobalData, comments: “In the event of a widely distributed vaccine in H1 2021, major economies such as the US, the UK and Germany are forecasted to grow by 4%, 5.5% and 3.9%, respectively. However, developing nations are bound to be troubled by major challenges such as rising income inequality, poverty and reduction in remittances from workers abroad, on top of increasing fiscal deficit and gross debt.”
Patel continues: “Although GlobalData forecasts a revival of the global economy, with real GDP to grow by 5.31% in 2021, the pandemic has created some long-term challenges. ‘Temporary’ layoffs in the US are likely to turn permanent as an increasing number of companies are filing for bankruptcy and announcing major reduction in the workforce. Limited economic activity would lead to lower earning of businesses, and, consequently, make it difficult for companies to repay debt and avoid bankruptcy. Many countries’ currencies have significantly depreciated against the dollar and euro. Due to the outbreak, repayments will increase for companies that have borrowed dollars and euros.
“The long-term impact will be felt hardest by poorer people living in rich countries, while the more severely impacted will include poorer countries. Those in Asia have major challenges to address such as youth unemployment, rising poverty and income inequality.”
The International Labour Organization and the Asian Development Bank estimates a loss of about 15 million jobs in 2020 among young adults and teenagers within the Asian region.
Patel concludes: “Implementing adequate reforms and addressing major challenges such as unemployment and income inequality remain the need of the hour. If any reforms are not adequately implemented, these issues would become increasingly challenging to address in the years to follow.”