Tourism was another of the sectors most affected by the pandemic. Acc...
2021-01-04 2 ENGLISH REPORTS
We believe the longer-term hit will be smaller – falling to about $1 trillion by 2034. But graph shows how other impacts are likely to emerge – we believe that the scarring to the world economy will affect the trade-off between growth and inflation and so predict an economic cycle in the early to mid-2020s as inflation caused by the hit to the supply side from Covid-19 works its way through. However, we at Cebr can claim some credit. Cebr’s forecast for the impact on the world economy from the virus has in aggregate remained essentially unchanged since March 2020. In March we expected world GDP to be down by ‘at least 4.0%’. Our latest estimate is a decline of 4.4%. To quote from Cebr’s Global Prospects release from 20 March 2020: • We have severely downgraded our forecasts for virtually all economies covered. Given that only very little hard data is available showing the impact of the virus on world economies, the forecasts largely reflect our estimates of the economic effects of a partial shutdown of countries for a limited amount of time, mostly focused in Q2 2020.
One exception here is China, which has seen the largest impact in the first quarter and can expect to slowly return to more normal economic activity in Q2. The Chinese example, however, also shows that it won’t be easy to just switch back to ‘normal’ production mode as businesses will continue to implement strict public health measures to prevent a new outbreak. • We estimate that world GDP will fall by at least 4.0% this year, clearly with a huge margin of error. If this is correct, the fall will be more than twice as large as in 2009 during the financial crisis and will be the largest drop in GDP in one year since 1931 other than in years affected by war. • Provided that both fiscal and monetary action are taken on the extensive scale promised, there should be a sharp economic recovery in 2021 with world GDP growth of 3.4% although it will be 2022 before world GDP overtakes the 2019 level.
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