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Global Macroeconomic Scenarios - June 2021 Update

This commentary provides the latest update to DBRS Morningstar's Global Macroeconomic Scenarios, which were first published on April 16, 2020. These scenarios have been regularly updated to reflect the most recent developments relating to the global coronavirus (COVID-19) pandemic and its economic consequences. A global recovery is underway, led by advanced economies that have made substantial progress in vaccinating the adult population and have reduced mobility restrictions. However, the global pandemic is not over, and it continues to pose risks to the recovery.

Key highlights of this update include:

• Vaccination drives have generally proven effective in reducing transmission and severity of COVID-19. This bodes well for the economic recovery in H2 2021 and in 2022. However, emerging COVID-19 variants and limited vaccine penetration in some areas continue to pose risks.
• Unemployment and residential real estate have performed better than expected. Household balance sheets are in good condition, supported by expansionary fiscal and monetary policy responses.
• Within the advanced economies that are leading the global recovery, constraints on the availability of labor and disruptions to global supply chains are generating inflationary pressures. While this appears to be a temporary phenomenon, prolonged supply constraints could further boost core inflation and cause expectations of future inflation to rise.

“Until individual countries have achieved higher rates of immunization, we remain concerned about the prospects for a moderate resurgence in cases,” says Thomas Torgerson, Co-Head of Sovereign Ratings for DBRS Morningstar. “On the positive side, the spread and severity of COVID-19 is significantly more limited among vaccinated populations, and the overall economic outlook appears promising.”