Global economic outlook – Vaccinations and US fiscal stimulus boost growth prospects

• Published in: National Institute economic review Vol. 256
• Main Authors: Naisbitt, Barry, Boshoff, Janine, Holland, Dawn, Hurst, Ian, Liadze, Iana, Macchiarelli, Corrado, Mao, Xuxin, Juanino, Patricia Sanchez, Thamotheram, Craig, Whyte, Kemar
• Format: Journal Article
• Language: English
• Published: London Cambridge University Press 01.01.2021
• Subjects: Capital stock; Economic activity; Economic conditions; Economic growth; Economic policy; Fiscal policy; GDP; Global economy; Gross Domestic Product; Immunization; International economics; Pandemics; Prospects; Public health; Stimulus; United States > US
• ISSN: 0027-9501; 1741-3036
• DOI: 10.1017/nie.2021.17

Despite the devastating human toll of the second wave of the pandemic, the global economy has continued to grow. The second wave of the virus and the lockdown restrictions that have been imposed have not had as severe an effect on economic activity as those in the first wave. This experience, combined with the rollout of vaccines and the huge fiscal stimulus in the US offers the prospect of global economic growth continuing and strengthening. Our upward forecast revisions to global GDP growth this year and next reflect these factors. Into the medium and long term, an important issue concerns the extent to which the adverse effects may lead to slower global economic growth. ‘Scarring’ effects on human capital from high unemployment, as well as the adverse health effects from ‘long Covid’, and the period of lost investment to boost the capital stock could lead to slower global GDP growth than would have been the case had the pandemic not occurred. The extent of any such scarring will, however, only become clearer once the immediate threat of the pandemic has reduced and the path of global economic growth has returned in a sustainable manner.