UNEVEN GROWTH THREATENS RECOVERY OF WORLD ECONOMY

By The Financial District
Apr 5, 2021
2 min read

The world economy is on course for its fastest growth in more than a half-century this year, yet differences and deficiencies could hold it back from attaining its pre-pandemic heights any time soon, Rich Miller and Enda Curran reported for Bloomberg News.

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The US is leading the charge into this week’s semi-annual virtual meeting of the International Monetary Fund, pumping out trillions of dollars of budgetary stimulus and resuming its role as guardian of the global economy following President Joe Biden’s defeat of “America First” President Donald Trump.

Friday brought news of the biggest month for hiring since August. China is doing its part too, building on its success in countering the coronavirus last year even as it starts to pull back on some of its economic aid.

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It could take years for swathes of the world to join the U.S. and China in fully recovering from the pandemic.

By 2024 world output will still be 3% lower than was projected before the pandemic, with countries reliant on tourism and services suffering the most, according to the IMF.

The disparity is captured by Bloomberg Economics’ new set of nowcasts which shows global growth of around 1.3% quarter on quarter in the first three months of 2021.

But while the US is bouncing, France, Germany, Italy, the UK, and Japan are contracting. In the emerging markets, Brazil, Russia, and India are all being outpaced by China.

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Rob Subbaraman, head of global markets research at Nomura Holdings Inc. in Singapore, reckons Brazil, Colombia, Hungary, India, Mexico, Poland, the Philippines and South Africa all risk running overly loose policies.

“With major developed market central banks experimenting on how hot they can run economies before inflation becomes a problem, emerging market central banks will need to be extra careful to not fall behind the curve, and will likely need to lead, rather than follow, their developed market counterparts in the next rate hiking cycle,” said Subbaraman.

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