World Economic Outlook April 2021: economic recovery improves

In 2021 the recovery to pre-pandemic GDP levels is strongly driven by the US and China; more gradual upturn for major European markets


Covid-19 Macroeconomic analysis Conjuncture Foreign markets Uncertainty IMF Global economic trends

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On April 6, the International Monetary Fund (IMF) published the new macroeconomic forecast scenario - World Economic Outlook (WEO) - which gives a more positive picture of global recovery compared to the last October's publication. For 2020, the new estimates mark an improvement in the figure on the contraction of world GDP, which is now equal to -3.3%, compared to -4.4% previously estimated (see graph below).

The result reflects the above-expected economic recovery that characterized the second half of last year, the gradual easing of lockdown measures, and the increasing adaptation of international economic systems to the "new normal". Moreover, although the contraction in activity experienced in 2020 was unprecedented, the economic policy responses of the several governments are estimated to ensure recessionary effects more contained than the Global Financial Crisis.

Overall, the global economy is expected to grow at 6% this year, moderating to 4.4% in 2022, an uptick of 0.8 and 0.2 percentage points from the October 2020 scenario. Thereafter, in the medium term, the GDP growth rate is expected to normalize on the order of +3.3% on average.

Despite a general improvement in growth prospects, there are still risk factors: the high degree of uncertainty that still characterizes the international economic situation and the strong heterogeneity of the recovery of the several world economies. The recovery of economic activity is being characterized by a significant degree of asymmetry between the various countries and sectors; a map of the markets that are recovering more rapidly to pre-pandemic levels is therefore an important strategic piece of information for internationalization decisions in the near future.

Which economies will close the gap with 2019 GDP levels in 2021?

In order to identify the economies that are projected to recover the pre-pandemic GDP levels, the following chart shows the major world markets, taking into account the change in GDP in 2020 (x-axis) and the projected change in 2021 over 2019; the size of each ball is proportional to the value of the country's imports in 2019.
Above the line drawn in gray it is possible to identify countries that are expected to grow, below, all markets for which 2021 will not be sufficient to recover pre-pandemic levels.

GDP Growth by Country

Source: ExportPlanning

It's possible to highlight the following elements:

  • In 2021, the progressive recovery to pre-pandemic GDP levels is strongly led by two countries: United States and China. In particular, thanks to the fiscal stimulus package signed by President Biden, the improvement in the US growth projection is very large compared to previous editions of the WEO: in the October publication the US was expected to recover 2019 GDP levels only from 2022, in the current scenario the IMF estimates a growth of +2.7% in 2021 over 2019

  • The area of the chart above the gray line is heavily populated by Asian economies, where, in addition to China, the markets of Taiwan, Vietnam, South Korea and Indonesia are particularly resilient as early as 2020. From a more uncertain outline the growth prospects for the Indian market, although IMF estimates predict a broad rebound in 2021, the recent worsening of the health emergency, not considered in the scenario of April, in fact casts many shadows on the prospects for growth in the country (see the article India: New Covid Wave Poses Risks to Economic Recovery)

  • Recovery path decidedly more gradual for the main European economies, for which in 2021 it is estimated only a partial recovery of pre-pandemic GDP levels and a recovery path with a longer timeframe than that of the United States. The result reflects, on the one hand, the greater importance given to structural reforms by the countries of the euro area, whose benefits are linked to a medium-long time horizon, and on the other a slower and more problematic start of the vaccination campaign. In this context, the markets of Switzerland and Poland, but also those of Turkey and Russia, bucked the trend.