The World Economic Situation and Prospects mid-2021 report by the United Nations reveals a 5.4% expansion of the global economy in 2021 in contrast to a 3.6% contraction a year earlier. However, despite the rapid recovery projected for China and the United States, the forecast remains fragile for countries in South Asia, sub-Saharan Africa, Latin America, and the Caribbean.
A predicted recovery in advanced economies
The United States of America and China, with rapid vaccination programs and targeted fiscal relief in place, are projected to experience rapid economic growth in 2021. The economy of China is predicted to experience 8.2% growth in 2021 and 5.8% in 2022 due to a recovery in industrial production, exports, manufacturing, and infrastructure investment. The United States of America economy is predicted to experience 6.2% growth in 2021, exceeding its pre-crisis level of total output. The rapid recovery in the US is partially driven by the US$1.9 billion fiscal stimulus packages adopted in March 2021 aiming to increase personal disposable income and boost consumer spending. Furthermore, the US Federal Reserve has expressed a willingness to maintain its accommodative monetary policy position until 2023.
However, estimates from UN experts are not optimistic for all of the advanced world. Europe is projected to register only a 4.1% growth in 2021, a plunge of 0.7 percentage points from the last prediction. This decrease in expected growth is partially the consequence of the waves of mutated COVID-19 strains that have spread throughout European countries. Nevertheless, it is expected that growing export demand will instigate a 3.8% growth in 2022 within the region, demonstrating a 1.1 percentage point rise from the previous projection issued in January 2021.
Projected recovery in economies in transition and developing countries
Without the capacity to stimulate internal demand and amid the growing risks of a prolonged pandemic and restrictive measures, fragile economies face the prospect of a “lost decade”.
Amid uneven vaccination and policy support, the predictions are not optimistic for all economies in transition and developing countries. Community of Independent States member-countries and Georgia are expected to experience an aggregate GDP recovery of 3.3% in 2021 and 3.3% in 2022 while South-Eastern Europe is projected to grow by 4.2% in 2021 and 3.5% in 2022.
Africa, where the pandemic has dealt a severe blow to sustainable growth prospects, is expected to grow by 3.6% in 2021 in contrast to a deep contraction in 2020. Furthermore, per capita incomes are only projected to rebound to pre-crisis levels by 2024. South Africa GDP expansion is projected to grow by 2.8% in 2021.
With the successful rollout of vaccines continuing, East Asia is expected to grow by 7.1% in 2021 before levelling out to 5.2% in 2022. However, the recovery in the region is uneven and it is expected that regional economic growth will return to 6.9% in 2021 in contrast to a 5.6% fall in 2020. Western Asia is expected to achieve an aggregate GDP growth of 3.7% in 2021.
Countries from the Latin America and the Caribbean region, which are suffering the worst recession in over a century, are expected to rebound gradually with the projection that the region’s GDP will grow by 4.3% in 2021 and 3.3% in 2022 following the steep contraction of 7.3% in 2020.
Overall, the aggregate output growth of countries by sector of economic dependence in 2021-2022 is projected to be the highest in the manufacturing sector followed by the tourism sector.
