The global economic growth in 2021 is forecast at around 5% in market exchange rates — the fastest rate recorded in the 21st century — returning the global economy in aggregate to pandemic levels of output by the end of this year or early 2022, said PwC recently.
Uneven growth across countries, sectors, and income levels
Despite projected expansion this year, PwC cautioned that the next three-to-six months will continue to be challenging, particularly for the Northern Hemisphere countries going through the winter months as they could be forced to further localised or full economy-wide lockdown.
Output in some advanced economies, for example, could contract in Q1 and growth overall is more likely to pick up in the second half of the year, when it’s expected that large advanced economies will have vaccinated at least two-thirds of their populations, PwC said.
A distinguishing feature of the “great rebound” is that it will be uneven across different countries, sectors and income levels, said Barret Kupelian, senior economist at PwC.
“For example, the Chinese economy is already bigger than its pre-pandemic size, but other advanced economies — particularly heavily service based economies like the UK, France and Spain or those focused on exporting capital goods, such as Germany and Japan — are unlikely to recover to their pre-crisis levels by the end of 2021,” he noted.
In economies such as the UK, France, Spain and Germany, growing but lower levels of output are projected to push up unemployment rates, with most of the jobs affected likely to be those at the bottom end of the earnings distribution, thus exacerbating income inequalities, he added.
“Once the virus is under control, policymakers’ attention will need to focus on laying the foundations for sustainable and inclusive growth with particular focus on creating jobs and pushing the green economy agenda,” Kuplian said. “Business leaders need to plan now both in terms of growth and investment, including upskilling of their existing workforce as a key aspect.”
A synchronised push for green infrastructure
Another important focus for 2021 will be the environment, PwC pointed out.
It’s already being positioned as an opportunity for accelerating the business and policy transition to net zero, the firm said.
Significant investment and policy shifts related to the Paris Climate Agreement are expected in 2021 in the major trading blocks including the US, China and the EU, PwC pointed out.
Green bonds, which are used to directly finance environmental projects, currently make up less than 5% of the global fixed income market, according to PwC.
In 2021, total green bond issuance will increase by over 40% to top half a trillion US dollars for the first time, the company predicted.
In addition, investor appetite for Environmental, Social and Governance (ESG) funds will continue to increase and could account for up to 57% of total European mutual funds by 2025, the firm added.
Globally, the analysis points to electricity production from renewables continuing to gather momentum, with solar photovoltaic (PV) capacity likely to grow at rapid rates on the back of growing capacity in the EU, India and China, the firm explained.
If current trends continue, solar PV capacity is on course to surpass natural gas in 2023 and coal in 2024 in the global electricity sector, the firm added.