By Tom Burnett CFA
On January 5, 2021, the World Bank issued its updated economic prospects forecast. The Bank issues its global GDP forecasts in June and January of each year. The latest report is a somewhat more optimistic set of forecasts compared to the conclusions reached in June 2020 report. The June report was issued during the initial stages of international activity to stem the growing outbreak of the Covid-19 virus. As economies shut down in reaction the spreading of the virus, economic activity ground to a halt. Growth prospects turned negative and global unemployment surged dramatically. Six months later, with vaccine prevention prospects improving, the economic forecasts have taken a more positive direction. We summarize the main conclusions below:
The Percentage figures represent the projected changes in annual GDP from the annual figure for the prior year.
The World GDP change in 2020 is now expected to be -4.3% which is an improvement from the negative rate of 5.2% expected in the June Report. For 2021, world GDP growth is expected to recover and to grow by 4.0%. The 2021 rate was thought to grow by 4.2% in the June Report.
In the U.S., GDP growth in 2020 is now projected to have declined by 3.6%, much less than 6.1% decline predicted in the June Report. U.S. GDP growth of 3.5% is now forecast for the 2021 year. In the June Report, a recovery of 4.0% was expected.
In the EU, the latest Report predicts a decline of 7.4% in 2020, with a recovery of 3.6% growth predicted for 2021. The 2020 figure would be an improvement from the negative 9.1% decline estimate in the June Report.
Finally, the latest Report predicts that China will show GDP growth in both 2020 and 2021. The rate for 2020 is a positive 2.0% with an even stronger rate of increase—7.9%—expected for 2021. China is the only economic region expected to achieve GDP growth in both 2020 and 2021.
Tom Burnett CFA is Director of Research