The world is still amid the pandemic but the global economy is ready to bounce-back to pre-pandemic levels. Experts argue that the recovery could be within sniffing distance powered by the massive stimulus package by the US’ new Biden administration.
- The United States is leading the world to economic recovery.
- The global economy recovery will be much faster-paced than expected.
- However, some sectors that need “extra-care” post-pandemic to revert to pre-pandemic levels.
- Nevertheless, there’s uncertainty around a W-shaped recovery, following the second-wave of mutated Covid-19 virus in various countries.
A few months back, Goldman Sachs injected optimism among people and markets with impressive economic forecasts for the U.S.‘ recovery. Adding to the optimism, the prospects ahead appear promising not just for the U.S. but for the global economy. The United States has always played a driving role in the recovery of nations worldwide after the crisis. After the economists at Goldman predicted an 8 percent growth of the U.S. economy in 2021, the world economy is now projected to grow by 6 percent this year. The forecast by Oxford Economics depicts the fastest global recovery rate of almost fifty years, better than the 2008 crisis.
The driving role to rescue the world from the financial crisis that was played by China after the 2008 crisis, will this time rest on the shoulders of the U.S. Economists are “exceptionally bullish” for the future of the world as vaccine rollouts, stimulus packages, and revived jobs are bringing situations back to normal.
$1.8 dollars have been added to the savings of Americans during the pandemic, along with 70 percent of the last stimulus cheque. The trend of saving is expected to continue with new stimulus checks too. Furthermore, corporations have started hiring again. Tech-giants like Google have already also rolled out billion-dollar plans to expand their real estate.
Watch: How can the global economy recover from the pandemic and what shape will the recovery take?
According to Catherine Mann, Global Chief Economist at Citibank, “The U.S. is going to play the role of the global locomotive again in 2021.”
The recovery worldwide
The U.S. and global economy is recovering much faster than expected. The Covid-19 pandemic should have given a much stronger blow than the 2008 crisis as the world underwent a complete lockdown. However, none of that happened and there are several factors to thank for the same.
Despite the lockdown, global trade flourished. Much of the trade has now restored to pre-pandemic levels. Similarly, people are ordering online more than ever. The credit goes to big tech firms here.You will find more infographics at Statista
The governments too applied the lessons learned during the financial crisis of 2008 and rolled out elaborative stimulus packages. This includes the U.S. government sanctioning significant funds to the local and state governments to hop on the upward trajectory of growth. During the 2008 crisis, neglecting the recovery of the state and local government costed the U.S. It slowed down the US’ overall revival notably.
Sectors that could failed to catch the ripple effect of the U.S. economy
Even the revival of the U.S. economy can’t save some sectors of the global economy. The fate of these sectors hangs in balance with multiple uncertainties. One such huge sector is the tourism industry of Europe. With new variants every month and periodic sharp hikes in the cases of Covid-19, the realignment of the tourism industry of Europe still appears in shambles. Tourism in America and Asia isn’t promising either for the coming few months as the irregular increase in cases poses a challenge before governments.You will find more infographics at Statista
A lot of jobs and businesses face a threat of permanent removal from the market. Experts predict that the lockdown and pandemic might result in a permanent shift in consumer behavior. This includes retail jobs due to the increasing popularity of online shopping.
The growth locked, but not loaded
Nevertheless, unfulfilled fears of a pandemic and the supersonic revival of the global economy does not negate the fact that Covid-19 is here to stay. The remerging waves and new mutations of virus in different parts of the world indicate the lingering fear of another global setback. These possibilities are as real as March 2020, with Europe and other parts of the world repetitively succumbing to the virus and resorting to lockdowns.
Due to the same reasons and also the uncertainties of the efficacy of vaccines, economists are calling this the Covid-19 led pandemic, i.e. a W-shaped recession. The Q2 of 2020 was an extreme financial blow for the world. However, growth in Q3 was surprisingly exceptional. The exact results of the Q4 performance are soon to be out. Q4 numbers would put more in-depth analysis into perspective. But its Q1 of the FY 2021 where the recession is expected to leave with a bang. The path of Q1 2021 recovery has already been paved by the Biden administration in their stimulus pack in Q3. And Goldman Sachs can’t agree more.