Global economy outstrips pre-pandemic peak

The global economy has surpassed its pre-pandemic peak as the rebound accelerates on the back of vaccination and the easing of pandemic-related restrictions, a survey by IHS Markit revealed.

While the Middle East and Africa region will return to pre-pandemic GDP in the third quarter that begins in July, the Asia-Pacific region recovered from the pandemic recession at the end of last year thanks to the resilience of China’s economy, the global data survey firm said.

With 6.0 per cent growth this year, the global economy will post its biggest expansion in nearly 50 years, it said.

IHS Markit’s forecast resonates with the bullish global growth outlook made by the World Bank recently. Predicting a 5.6 per cent surge in 2021, the World Bank said the fastest economic rebound in 50 years would be accelerated by vaccinations and massive government stimulus in rich countries. The projected global expansion would make 2021 the fastest year of growth since 1973’s 6.6 per cent, the bank asserted.

The global economy has reached an important milestone in the second quarter of 2021 (ending June 30), surpassing the pre-pandemic real GDP peak attained in the fourth quarter of 2019, IHS Markit, which conducts monthly surveys of businesses that are highly valued by the market as a leading indicator of economic activity, said in a statement.

IHS Markit’s economists estimated that US real GDP hit a new peak in May.

Europe and Latin America will complete their recoveries in the final quarter of this year.

“As recovery from the Covid-19 recession is completed, the global economy is moving into the sweet spot of the current expansion,” said IHS Markit’s executive director for global economics, Sara Johnson.

“World real GDP growth is picking up from an annual rate of 1.5 percent quarter on quarter in the first quarter to rates of 6.0-7.0 percent over the remainder of 2021,” she added.

IHS Markit’s 2021 global GDP growth forecast is also in line with that made by the International Monetary Fund in April.

The IMF said many nations would not recover to pre-pandemic levels until 2022 or 2023, while emphasising the unevenness of the recovery.

Along with the World Bank, the OECD has also warned about the recovery leaving some nations behind, especially given the lack of vaccines in many countries.

The OECD said that relief and stimulus measures in the more developed world had done much to get the economy through the pandemic recession and back on the path of growth. It forecast global output would rise 5.8 per cent, raising its forecast from 4.8 per cent during its previous outlook in December. This year’s predicted rebound follows last year’s contraction of 3.5 per cent, and would be the fastest since 1973

IHS Markit acknowledged that Covid-19 flare-ups remain a risk to economic recovery in places where vaccination has proceeded slowly.

It also pointed to constraints on the recovery posed disruptions in the supply of certain goods, including semiconductors used in electronics goods and cars.

The survey found that supplier delivery times lengthened in May to the greatest extent in survey history.” Supply disruptions are one reason behind a jump in prices.

IHS Markit said it expects to consumer price inflation to rise to 3.3 percent this year before dropping to 2.7 percent next year as supply conditions improve.

Investors have become increasing worried that the rapid recovery inflation may prompt central banks to remove stimulus support and raise interest rates faster than they have stated previously.

— issacjohn@khaleejtimes.com