The global economy, according to international credit insurance provider Atradius, is “recovering fully” from 2020’s major pandemic-induced downturn.
In its new economic outlook, the insurer is predicting a 6.2% growth rate for 2021. Atradius said this projection is higher than was expected half a year ago. It was noted that the pace of recovery is “generally surprising to the upside,” especially in places where vaccination campaigns are in full swing and are achieving high rates.
More specifically, advanced economies are forecast to grow 5.8% this year. This would more than make up for the cumulative drop in gross domestic product (GDP) in 2020, highlighted Atradius.
“Some of the uncertainty that hung over the market last year has disappeared,” stated the insurer in a release. “In the US, President Joe Biden is expected to follow a more consistent policy than his predecessor did. Furthermore, the Biden administration has implemented several fiscal stimulus bills, boosting GDP growth in the US and elsewhere.
“The outlook for the UK is also substantially brighter than it was at the beginning of 2020. Consumers are driving the recovery in the UK, with strong growth in the hospitality sectors, despite trade growth with the EU (European Union) falling behind on Brexit and pandemic uncertainties.”
Atradius’s forecasts, however, assume that governments have the ability to effectively contain new surges of the coronavirus. The more transmissible Delta variant could potentially derail global recovery.
“If vaccines are less effective against new virus variants like Delta than expected, governments may have to re-impose restrictions later this year,” said the credit insurance specialist. “This creates a downside risk to positive forecasts and would reduce consumption opportunities and drag on GDP growth in 2021 and 2022.”
Chief economist John Lorié conceded that it will be a challenge navigating a path of the pandemic.
The Atradius executive added: “The recovery prospects look good amid rising consumer demand and fiscal stimulus, but rising inflation indicates there are supply-side issues that need to be overcome. While we expect inflation to revert back to normal levels in 2022, high inflation remains a downside risk, especially if it triggers a forced tightening of monetary policy that would hamper the recovery.”