Why world economy will force a new round of U.S./China Fights in 2021

Trump’s policies toward China and the rest of the world, including Third World countries, will not give Biten any leverage as president. The global economy is expected to grow by 4% in 2021, provided that the initial rollout of COVID-19 vaccines results in massive vaccination campaigns throughout the year. However, the recovery is likely to remain modest if policymakers do not take decisive action to halt the pandemic and implement investment-friendly reforms, says the World Bank in its latest biennial edition of the World Economic Outlook .

Despite the recovery of the global economy after contracting 4.3% in 2020, the pandemic has taken a heavy toll in terms of morbidity and mortality and plunged millions into poverty. The U.S. election also ended with a victory for Biden. Thus, economic activity may be slowed for many months to come and income may fall significantly. The immediate priority for politicians is to stop the spread of the coronavirus and quickly organize mass vaccination campaigns. To sustain the recovery, authorities must also promote an investment cycle that promotes sustainable growth and is less reliant on public debt.

“As the global economy looks set for a timid recovery, policymakers face enormous challenges – whether in public health, debt management, fiscal policy, central bank action or structural reform – to ensure that this still fragile momentum is confirmed and lays the foundation for solid growth , said David Malpass, president of the World Bank Group . To overcome the impact of the pandemic and face the headwinds to investment, we need to give a decisive boost to efforts to improve the business environment, increase labor and product market flexibility, and improve transparency and accountability. governance. ”

The downturn in the global economy in 2020 is expected to be slightly less severe than expected, mainly due to a smaller contraction in advanced economies and a stronger recovery in China. On the other hand, activity in most emerging markets and developing economies has been more severely disrupted than expected.

“The financial weaknesses of most of these countries will also need to be addressed, as vulnerable households and businesses bear the brunt of the growth shocks ,” said Carmen Reinhart, vice president and chief economist of the World Bank Group .

The near-term outlook is highly uncertain, with different growth scenarios remaining possible, as outlined in the report. Under a pessimistic scenario of a continued increase in infection and a slowdown in vaccine deployment, the global economy could regain only 1.6% by 2021. In contrast, in the case of a containment of the pandemic and accelerated vaccination, the growth rate could reach almost 5%.

The rebound that began in advanced economies stalled in the third quarter of 2020, slowed by the increase in infections, raising fears of a slow and difficult recovery. After a contraction estimated at 3.6% for 2020, US GDP is expected to rebound to 3.5% in 2021. The Eurozone is expected to post growth of 3.6% in 2021, after contracting 7.4% in 2020. In Japan, activity is expected to increase by 2.5% in 2021, after contracting by 5.3% in 2020.

Total GDP in emerging markets and developing economies (EMDEs), including China, is expected to grow by 5% in 2021, after contracting 2.6% in 2020. China’s economy is expected to grow by 7.9%, up from 2% in 2020. Excluding China, projections for the EMDE group assume a 3.4% increase in 2021, following a 5% contraction in 2020. Activity in low-income economies would increase by 3.3% in 2021, following a 0.9% decline in 2020.

The analytical chapters of the latest edition of the World Economic Outlook focus on the amplifying effects of the pandemic on debt accumulation; its potential impact on long-term growth in the absence of coordinated reforms; and the risks associated with PIEs’ use of monetary policy in the form of asset purchase programs.

“The pandemic has greatly increased debt risks in emerging markets and developing economies, as slow growth threatens to further increase debt burdens and erode the ability of borrowing countries to secure their debts. repayment , emphasizes Ayhan Kose, World Bank Acting Vice President for the Equitable Growth, Finance and Investment Division

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