Pandemic-driven global GDP loss set to be wiped out in 2021 – Atradius

Global GDP is expected to recover by 5% this year and global trade to increase by 7% to 8%, according to Atradius’s new baseline forecast. But the trade credit insurer warned that the recovery will be uneven and there remains a lot of uncertainty because of Covid-19. Atradius also warned that insolvencies could rise “dramatically” as fiscal stimulus is phased out. The global economy shrank by 3.9% last year, according to Atradius. Under its baseline scenario, the pandemic’s impact on GDP will therefore be wiped out by the end of 2021. Its current baseline forecast anticipates a good pace of vaccinations, resulting in permanent reductions in restrictions by mid-year, and continued fiscal support from governments. Atradius said the recovery under this assumption will be uneven. Emerging Asian countries, led by China and India, would recover much more strongly than the rest of the world. Europe and South America, on the other hand, will be laggards and only reach 2019 GDP levels some time deep into 2022, said Atradius. The US and eastern Europe would be mid-performers and restore GDP levels before 2021 year-end. Global trade, meanwhile, is expected to see a similar-sized rebound to the 7%-8% fall in 2020. Atradius’s baseline forecast would see advanced markets achieve 3.9% GDP growth in 2021, after a 5% decline last year. Eurozone economies saw GDP fall 7.1% in 2020 and are expected to see a partial recovery of 4.2% in 2021. Atradius said activity is only expected to return to pre-pandemic levels in 2022. The UK is expected to see GDP growth of 4.5% this year, after a 10.3% fall in 2021. Under the baseline scenario, US GDP would rebound by 4.2% this year after a 3.5% fall in 2020. Emerging Asia would grow GDP by 7.4%, from a 0.3% drop in 2020. Latin America’s GDP would increase 5.4%, from a 7.4% contraction. And eastern Europe’s GDP would rise 3.2%, from a 2.8% decline last year. Emerging markets as a group are forecast to grow by 6.3% in 2021, following a 1.9% contraction in 2020. Atradius warned there is “considerable uncertainty” around its baseline forecast, given the possibility of a delayed recovery if there is a “stretched wave of global infections”. This would significantly reduce GDP growth in 2021 and effectively push the recovery into 2022, said Atradius. In its delayed-recovery forecast, global GDP would only recover by 3.6% this year and by 2.5% in the eurozone. It would rebound by 2.9% in the US, 4.8% in emerging Asia, 4.4% in Latin America and 1.6% in eastern Europe. Simon Rockett, head of UK risk underwriting at Atradius, commented: “The 2020 recession has been unique in that GDP and trade have been severely impacted but insolvencies remained low due to the fiscal stimulus and temporary freezing of bankruptcy proceedings in many markets. This however could change dramatically as stimulus is phased out. In the interim, business support remains essential to support both individual firms and wider economies. Cautious credit management including attention to the financial stability of your business and that of your buyers remain paramount.”

Pandemic-driven global GDP loss set to be wiped out in 2021 – Atradius

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