■ Vaccine-privileged economies enjoy respite
New Delhi, Aug 17 (Mayank Nigam) The global economy will rebound strongly in 2021 at 5.3 per cent following the sharp Covid-19-induced contraction of 3.8 per cent in 2020. The growth will be even stronger than the recovery in 2011 after the global financial crash, said Dun and Bradstreet (D&B) India’s Country Risk and the Global Outlook report. “Consumer and business sentiment indicators have recovered in countries with advanced vaccination programmes, and economic prospects are diverging sharply along the lines of vaccination rates and fiscal policy capacity,” said the research and advisory firm’s Global Chief Economist Arun Singh.
The report said that the divergence in vaccination programmes between advanced and emerging economies is reflecting in similarly diverging growth prospects. While 40 per cent of the population in advanced countries has been fully vaccinated, the vaccination coverage is just 11 per cent in emerging economies. Despite the strong growth seen in recent quarters, Dun and Bradstreet is concerned that the withdrawal of fiscal and monetary supports – including of furlough schemes (which will see household spending curtailed) – will start putting pressure on business’ cash flows and balance sheets among vulnerable small and medium enterprises (SMEs), even in economies that have secured hope of relief from the coronavirus. After the lull in bankruptcies in 2020, this will lead to a deterioration in payments performance and an increase in bankruptcies in many of the vulnerable SME sectors, with services sector bankruptcies in the US already having hit 2019 totals for 2021 by May, according to Dun & Bradstreet.
“In price-adjusted terms, domestic demand, a way to gauge economic activity without the addition from exports, leapt 13.8 per cent year-over-year (y/y) in the US, 20.4 pc y/y in Spain, and 8.9 per cent y/y in Hong Kong in Q2 2021. However, the average y/y growth taken over the two past years was still weaker than the pre-pandemic trend in all cases,” it said. The report noted that only in a very few economies has the boost from international trade in goods in high demand during the pandemic allowed output to exceed likely pre-pandemic trends, and then only in manufacturing.