The world economy
We assume that the global economy will grow strongly in 2021 following the deep recession of 2020; this applies both to the industrialized countries and to the emerging markets. However, especially in the northern hemisphere, containment of the covid-19 pandemic is likely to affect the first few months of the year. Along with the expected spread of effective vaccines through the population, the situation should improve from the second quarter onwards and the upturn should gain momentum. Over the course of the year, the global economy should be able to return to its pre-crisis level of the fourth quarter of 2019. Global trade should also increase again significantly after the deep slump in 2020.
The economy of the European Monetary Union is expected to remain severely impacted by the coronavirus pandemic in 2021, but after a weak start, it should increasingly gain momentum as the year progresses. This should be supported both by the recovery in global trade and by improved prospects for domestic demand as restrictions on economic activity are gradually eased or lifted. In addition, the European Central Bank’s monetary policy is likely to remain very expansionary and support the economic recovery. Investment activity in the euro zone should also benefit from the start of implementation of the EU Recovery Fund. Overall, these developments should lead to an economic growth rate in the European Monetary Union of approximately 4 %, while developments within the region will continue to be very heterogeneous. The German economy should follow a similar pattern and grow by about 3.5 %, primarily because of an expected strong second half. The UK economy should also continue to recover, but is likely to suffer noticeably in the first few months of the year in particular from the stringent measures taken to combat the covid-19 pandemic and the growth-dampening impact of the country’s exit from the EU single market effective January 1, 2021.
We also expect the US economy to grow strongly by about 5 % in 2021, driven primarily by dynamic growth in private consumption and possibly by additional fiscal stimulus. As vaccination rates rise, especially those services sectors should recover which were severely affected by pandemic-related restrictions. This should also ensure that unemployment continues to decline noticeably. The US Federal Reserve (Fed) is likely to maintain its expansionary monetary policy as announced and to continue supporting the economic recovery.
The Japanese economy is expected to recover at a rather moderate rate of approximately 3 % this year, driven mainly by strong export growth in the context of the recovery in global trade.
We expect strong growth momentum in China as the recovery in private consumption is steadily gaining pace, while industrial production and exports continue to rise. Based on a recovery of the labor market and improved consumer sentiment, consumption is likely to contribute significantly to the expected growth of more than 8.0 % this year. Against the backdrop of this robust development, the Chinese government is likely to gradually scale back its fiscal and monetary support measures.
The emerging markets as a whole will also recover noticeably this year, whereby the positive effects of coronavirus vaccinations are only likely to materialize with a certain delay compared with the industrialized countries. The Asian region is likely to recover most strongly, even though the growth momentum in the various countries is likely to remain disparate. In contrast, the recovery of Latin American and Central and Eastern European economies is expected to be significantly more moderate. The countries of the Middle East are likely to benefit from a slight recovery of the oil price, but in a long-term comparison, the oil price will remain moderate according to current estimates. Taken together, the emerging economies should achieve overall growth in the region of 6 % in 2021.
Overall, the world economy is likely to experience a strong recovery in 2021 with growth of about 5 %, thus expanding at a pace that is well above average by long-term standards.