SIMC20: What next for global economies in 2021?

2020 has been a year filled with immense global uncertainty and ongoing speculation about the scars the Coronavirus crisis may leave on our communities, businesses and economies. 

As we approach December investors will start to look ahead to 2021 and what shape the recovery will take.

At Schroders Digital International Media Conference 2020, the audience heard what’s in store for global economies in 2021.

Keith Wade, Chief Economist, Schroders commented:

“Expectations of what’s to come in the new year have been altered by the second wave of the Coronavirus, which as predicted by many, has swept across the United States and Europe and the outcome of the US election.

“Foremost, in the United States the daily rates of new cases and hospitalisations have reached new peaks and, after promising signs of recovery in the summer, Europe is also struggling to get the second wave under control leading to a series of national lockdowns. Meanwhile, the absence of a Democrat sweep, as indicated by the opinion polls means we will not see the scale of fiscal stimulus expected by markets before the election.

“With this in mind we’re facing a dark winter as Covid-19 remains centre stage with the risk of a double dip recession in the US and Europe. The vaccine will not arrive in time to alter this, but should we get confirmation of an approved vaccine, it will support broader growth for global economies in the second half of 2021 as the service sector revives.

“Looking further out there is scope for stronger growth as the world economy uses up the slack created by the pandemic, however interest rates will stay close to, or below, zero in the major economies. The new policy framework in the US means that we are unlikely to see this change for three years as the Federal Reserve is expected to run the economy ’hot‘ to generate a period of above 2% inflation. Low interest rates will help governments sustain the high debt levels created during the pandemic, but may well bring volatility to markets and will certainly be a major challenge for investors.”