What's on the horizon for the global economy?

Our weekly updated overview highlights the key releases of global economic market data from around the globe and provides an economic outlook for the rest of 2021 by region.

  • In our Week Ahead podcast we are discussing the main themes that will drive Global markets.
  • Our updated calendar identifies the top events that should be on your radar this week.
  • We also provide an outlook overview region by region for the rest of the year.

Our view in a nutshell

Japan

  • We expect growth to accelerate on vaccination progress, but another pandemic surge suggests flat short-run economic activity.
  • With the prolonged pandemic pushing down inflation, elevated international commodity prices will gradually push the rate higher.
  • We do not expect significant change in economic or monetary policy, even under the Kishida administration.
  • The risk is renewed yen appreciation, caused by deepening US-China tensions and further risk averse moves in markets.

Asia

  • Asia’s growth is on a bumpy upcycle and is likely to become more broad-based across exports and domestic demand.
  • The vaccine pivot point is ahead, with six economies likely to cross the threshold by Q3, enabling consumption to catch up.
  • Northeast Asia benefits from chip shortages amid the tech super cycle, with better pandemic resilience supporting consumption.
  • In Southeast Asia, elevated cases and tighter government restrictions could weigh on near-term domestic demand.
  • We expect Singapore and Taiwan to be the growth leaders in the region, while Thailand and the Philippines could lag.
  • Drivers of inflation will likely shift from supply-side to demand-push, but still broadly within the central bank targets.
  • We expect central banks to remain patient, except in Korea and India, where we expect rate hikes.
  • Korea: As Korea’s economy continues its gradual recovery, we expect a second hike in November following the August hike.
  • India: We expect inflation to remain elevated, growth upcycle to continue and policy normalization to begin from Q4 2021.
  • Indonesia: The impact of the latest Covid wave on GDP and the fiscal deficit will be large, raising debt monetization risks further.
  • Australia: A COVID-19 third wave has interrupted the recovery but we see growth resuming from Q4, with progressive reopening.

China

  • We expect a notable growth slowdown in H2, and Beijing to maintain its unique policy mix of “targeted tightening + general easing”.
  • We see strong growth headwinds from Covid-19, cooling property markets, likely slowing exports and Beijing’s green measures.
  • Beijing may stick to its property tightening policies and green measures to cut carbon emissions and energy intensity.
  • We expect Beijing to ramp up its monetary and fiscal supports, but they appear insufficient to reverse the growth downtrend.

United States

  • Vaccinations, economic re-opening and fiscal stimulus are boosting growth, but we expect a notable deceleration over 2022-23,
  • Democratic control in Washington means more fiscal stimulus, but partisanship and narrow majorities will likely constrain policy.
  • We expect a November tapering announcement with a $10bn ($5bn) reduction per month in monthly Treasury (MBS) purchases.
  • The Fed will likely liftoff in Q2 2023 with one rate hike every six months thereafter until a terminal rate of 2.00-2.25%.
  • We expect the unemployment rate to decline to 4.5% by end-2021 and 3.5% by end-2023 with breadth becoming more important.
  • Economic reopening and supply chain disruptions will likely push up near-term inflation, but we expect deceleration in 2022.
  • Notable risks include new SARS-CoV-2 variants, upside and downside risk around fiscal policy and higher inflation expectations.

Europe

  • We expect euro area GDP to return to pre-pandemic levels in Q4 2021, but the pace of the recovery will differ across countries.
  • Base effects, policy and weight changes, and global price pressures set to raise European inflation well-above target by year-end.
  • After announcing a “moderate” tapering of PEPP, we expect an increase in the APP and a temporary APP envelope in December.
  • Despite rising mobility, we continue to see UK GDP taking longer (H1 2022) to return to pre-virus levels than the BoE (Q4 2021).
  • Our Q4 2021 inflation view now stands at 4.5%. Still, we see inflation falling back towards target by end-2022/early-2023.
  • The biggest risk to our view of the first rate hike in August 2022 is for earlier tightening, though slowing growth is also a concern.

For more information read our weekly report here

Contributor

    Aichi Amemiya

    Aichi Amemiya

    US Economist

    George Buckley

    George Buckley

    Chief UK & Euro Area Economist

    Ting Lu

    Ting Lu

    Chief China Economist

    Takashi Miwa

    Takashi Miwa

    Chief Japan Economist

    Rob Subbaraman

    Rob Subbaraman

    Head of Global Macro Research

    Sonal Varma

    Sonal Varma

    Chief Economist, India and Asia ex-Japan

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