The global economy contracted by 4.3 percent in 2020, signaling the start of a recession. The world economy entered the fourth most severe recession in the previous 150 years as a result of this downturn, which was caused by the far-reaching effects of the COVID-19 epidemic. According to The World Bank’s analysis titled Global Economic Prospects, the global economy would begin to recover in the year 2021. Despite the devastating effects of the epidemic and the severe recession.
Moderately Slow Growth Predictions
Despite a resurgence in global economic activity, the rate of growth will be much less than it was before the outbreak for some years. According to financial analysts’ forecasts, global output will grow by 4% in 2021.
The following are the global production forecasts produced by both developed and emerging economies:
Developed economies
- The United States Gross Domestic Product (GDP) fell by 3.6 percent in 2020 and is expected to rise by 3.5 percent in 2021.
- Europe’s output declined by 7.4 percent in 2020, while a gain of 3.6 percent is projected this year.
- Japan’s level of activity fell by 5.3 percent in 2020, while future estimates show that it will rise by 2.5 percent in 2021.
- Markets that are still in their early stages of development
- Following a 2.6 percent fall in 2020, it is expected that the GDP of developing countries and emerging markets (including China) would climb by an average of 5 percent in 2021.
- China’s GDP is expected to expand by 8.4 percent this year after contracting by 3.5 percent in 2020.
- With the exception of China, emerging markets and developing countries had a 5% decline in 2020, but are expected to grow by 3.4 percent in 2021.
- The GDP of low-income nations declined by 0.9 percent in 2020 but is expected to recover by 3.3 percent the following year.
Debt buildup has an impact on global economic growth
The forecasts also suggest that potential global growth would slow over the next ten years, which has long been predicted. According to the World Bank, Covid-19 has exacerbated the hazards associated with a decade-long surge of global debt building.
Debt sustainability is a topic of concern since the recent buildup of debt occurred so swiftly and on such a vast scale. While the pandemic has demanded large-scale borrowing to fund critical support measures, numerous nations may consider taking on debt to enable investments that will boost GDP. Furthermore, governments that have been particularly heavily struck may seek debt relief in order to restore their struggling economies and safeguard their most vulnerable citizens.
Who is to blame for the expansion?
Both China and the United States are positioning themselves to be the primary drivers of global development in 2021. In these economies, both company investment and consumer spending have soared, with confidence in the private sector and a positive attitude having a direct effect on the significant expansion in investment. Furthermore, when industrial output recovered from the effects of the pandemic, commodities prices and international trade both strengthened.
The United States economy will see strong GDP growth as a result of the huge scope of fiscal stimulus and loose monetary policy. Consumption and investment are increasing, and financial market performance is excellent, all as a result of an increase in consumer and company confidence.
China
The Chinese government’s shift to normalization of macroeconomic policy, as well as the control of financial system dangers and medium-term structural issues, is the cause for the country’s expected growth. The National People’s Congress triggered a renewed emphasis on moving production growth sources to small and medium-sized firms, the service sector, and high-end manufacturing, as well as a rebalancing of demand toward household spending. This shift in emphasis was followed by a shift in demand toward home spending.
Other important economies
According to predictions, China, the United States, India, Indonesia, and South Korea will be the only major countries with GDP that is higher than it was before the outbreak by the end of 2021. The 2020 recession is quite likely to have a negative influence on the remaining areas’ GDP and employment rates.
Which areas of the economy expanded during the pandemic?
According to new data from IBM’s U.S. Retail Index, the pandemic has accelerated the transition from shopping in physical locations to purchasing online by nearly five years. Customers not only choose online services such as Zoom, Amazon, and Netflix but there is also a surge in the popularity of online gambling as an alternative to gambling in traditional casinos.
According to the Business Research Company, the size of the online gaming business is predicted to grow by 12.0 percent, from 58.96 billion dollars in 2019 to 92.86 billion dollars in 2023. Spending on internet gambling in the United States has surged as a result of social distancing rules imposed on land-based casinos, increasing marketing efforts by online casinos and sportsbooks, and state legislation that has authorized online gambling in some states.
In addition, the data demonstrated the rates of participation in online casinos throughout the span of the epidemic. According to the available data, hundreds of new accounts are created at online casinos on a daily basis, and the total number of people who gamble via the internet continues to rise.
Quite a few nations have jumped at the chance to modernize their gambling laws in order to increase the amount of revenue that can be collected from gaming taxes. These nations have been quick to seize the opportunity. Belarus passed legislation to legalize online casinos, while Armenia eased some of the restrictions it had previously placed on gambling.
The Final Thoughts
It is essential to have functional internet services, fiscal support measures, and financial policies in order to keep the economic development that has been achieved going. In addition to preserving a stable monetary policy in order to boost productivity and implementing fiscal stimulus in order to boost demand, the authorities have a responsibility to ensure that decisive measures are put into place in order to limit the spread of COVID-19 and promote a healthy recovery. In addition, debt relief may be required for economies that are struggling in order for those economies to be able to support the most vulnerable members of their respective populations.