Global economic growth will continue, albeit at a moderating pace over the next three years, according to IHS Markit, which recently said the novel coronavirus remains a source of disruption for regional economies, but its economic impact will diminish with progress on vaccinations and treatments. As supply conditions improve, downstream inflation rates will start to ease in the first half of 2022.
IHS Markit purchasing managers’ index surveys are signalling an acceleration in service sectors that should continue into 2022, along with further recovery in travel and tourism. Global growth will settle to 3.4 per cent in 2023 and 3.2 per cent in 2024 as pent-up demand is satisfied, employment recoveries are completed, and fiscal and monetary policies tighten.
A measured tightening of monetary policies will help to restrain inflation expectations and actual inflation, the company said in an analysis.
The ebbs and flows vary across regions with each wave of the COVID-19 pandemic. The dampening effects of regional outbreaks on economic activity are then transmitted globally through trading relationships, it noted. With expansionary fiscal and monetary policies supporting demand, the implications are widespread supply shortages and escalating prices.
Global growth should pick up to a 3.8 per cent annual pace quarter on quarter in the fourth quarter, as resilience in Asia Pacific and North America outweighs a pronounced slowdown in Europe, where COVID-19 virus infections are now rising.
After a 3.4 per cent decline in 2020, world real gross domestic product (GDP) is projected to increase 5.5 per cent in 2021 and 4.2 per cent in 2022, IHS Markit said.
Pandemic-related constraints on growth will ease in response to rising vaccination rates, more effective treatments, business adaptations, and a rebalancing of consumer spending from goods to services.
With some critical supply shortages and shipping bottlenecks persisting into 2022 and beyond, inflation pressures will subside only gradually.
After a mid-2021 growth spurt, eurozone growth prospects are deteriorating, while the US economy is proving its resilience with robust gains in consumer spending and industrial production in the final quarter of 2021. Mainland China’s economy is resuming a long-term deceleration and Asia-Pacific economies are rebounding from third-quarter setbacks as factories reopen, IHS Markit added.