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2021 Macroeconomic Outlook - A break in the clouds

What a year 2020 has been! From optimistic expectations of broad-based global growth to conversations around the Sino-US trade tensions and its ability to stall the anticipated positive growth outcome, to the outbreak of a global pandemic that started out as a local outbreak in Wuhan, to civil unrest across many countries as socio-economic pressures mounted, to the debates over the US’ turbulent post-election process, 2020 has indeed morphed into the unthinkable – a year filled with so much turbulence. However, we can all agree that 2020 has been a year of reforms and remarkable developments, not just for governments around the world, but also for businesses and individuals. As we gradually draw the curtains on this remarkable year, we should remind ourselves that surviving this year is as much an achievement, as collecting trophies. We just lived through the most severe economic downturn in recent history, and that is an achievement worthy of pomp. Looking ahead however, we see a break in the clouds. Research breakthroughs on a medical solution to the virus, hold promise of a growth comeback in 2021. With the base expectation of a vaccine rollout in H1’21, the hope is that normalcy can return to many countries. In addition, a more cordial and diplomatic relationship between the US and the rest of the world - especially with respect to trade - could tilt global macroeconomic risks to the upside, putting many countries back on the growth path.

As much as we are optimistic about a global economic recovery in 2021, there are still potential risk factors. There always are. But we are betting on a more predictable and somewhat less exciting (compared to 2020) 2021. Recovery in 2021 may however be K-shaped – uneven and split between industries and income groups. Technology related sectors could record stellar growth, while structural impediments – especially in emerging markets – could constrain manufacturing recovery. The process of re-thinking supply chains could weigh on both domestic and international trade, and delayed recovery in middle-class incomes could cause growth in realty to lag.