The Esade Economic and Financial Report produced in conjunction with Banco Sabadell forecasts global growth of around 5.2% in 2021, the same average growth expected in the euro zone. Growth of 3.1% is forecast in the USA and 8.2% in China
The monetary and taxation policies implemented during the crisis account for 12% of global GDP, a figure having a massive impact on the deficits of different countries and which may affect how quickly their economies recover in the medium and long term
The global economy will grow by 5.2% in 2021. Developed countries will grow less, by 3.9%, and will not recover the production levels lost over the last year until 2022. The scenario analysis in the latest Esade Economic and Financial Report [in Spanish] – produced in conjunction with Banco Sabadell and directed by Toni Roldán, head of EsadeEcPol and co-author of this section along with Esade professor Josep M. Comajuncosa – highlights the importance of the monetary and taxation policies during the start of the global economic crisis. Taxation policies, essential for the fallout of the pandemic being lower than expected, accounted for 12% of global GDP. Such sizeable investment will, however, hit public deficits hard and may affect medium- and long-term economic recovery in absolute terms.
Euro zone. A future linked to fiscal integration and public spending
Very strict confinements in the euro zone caused its economy to shrink by 8.3% in 2020, one of the highest rates amongst developed countries. Spain, Portugal, France and Italy were amongst the hardest hit. The euro economy could, however, have plunged further, “if the escape clause regarding the public deficit ceiling stipulated in the EU Stability Pact had not been activated, and also thanks to decisive action by the European Central Bank (ECB), which prevented member States’ risk premiums from climbing”.
The urgent ECB measures will be phased out and replaced by others to boost recovery, e.g. Next Generation EU funds, reductions in certain indirect taxes and higher public spending. It is hoped that these measures will make the euro zone grow by 5.2% in 2021 and return to pre-crisis production levels by mid 2022, except in some of the smallest euro-zone economies such as Luxembourg, Malta and Estonia. To be precise, Esade experts forecast GDP to grow by 5.2% in Italy and 6% in France, followed by 4.2% in Germany and 4% in the Netherlands in 2021.
As regards the management of the Next Generation EU recovery funds, the Esade experts emphasised the “colossal financial and administrative challenge” involved in submitting specific projects that meet the criteria stipulated by the European authorities. In the opinion of these experts, for the sake of the EU economy is it crucial for these funds to reach SMEs and enable more inclusive, environmentally-friendly growth, and also the structural overhaul necessary to deal with digital change and the shift towards a decarbonised, green economy. This shift will underpin the growth in productivity throughout the business fabric of Europe and its ability to compete in the entire global economy, besides creating new, better qualified, well-paid jobs.
Uneven recovery around the globe
The USA economy shrank by 4.3% in 2020 and will grow by 3.1% in 2021, whilst the UK economy, which plummeted by 9.8%, is expected to recover by 5.3% according to the authors of the report. The figures for Japan are 5.3% and 2.3% respectively.
Most of the emerging economies, forecast to grow by 6% in 2021, will face more difficult scenarios due to the on-going spread of the pandemic. Apart from the huge pressure on healthcare systems and public finance, this situation will cause greater reliance on foreign financial support and a stagnant tourism industry. Deficit higher than 10-11% of GDP. This will be the case in India and Indonesia whose economies fell sharply in 2020 and whose recovery in 2021 will be not return their GDPs to pre-crisis levels. Latin American economies, according to the report, will face a similar landscape.
China was the only major economy to grow in 2020. In 2021 it will grow faster than before the pandemic, at a rate of 8.2%, thanks to successful economic policies and excellent export performance which enabled its economy to return to normal in April.