- It has increased its forecasts for the US from 3.9% to 6.6% this year thanks to record aid packages with a direct impact on consumption and saving
- Global fiscal stimulus stood at around 3.5% in 2020, particularly due to steps taken in the US, EU and China
MAPFRE Economics has updated its forecasts for the global economy. After 2020, a year which saw the worst economic contraction since the Second World War (-3.3%), MAPFRE Economics expects to see a 6% rebound this fiscal year, up 0.8% on the estimate made in the last quarter, largely due to the deployment of fiscal and monetary stimulus. As such, global fiscal stimulus is estimated at around 3.5% for 2020, largely driven by the US, EU and China. According to MAPFRE Economics, in its report Economic and Industry Outlook: second quarter perspectives, published today: “Although we still expect to see generous amounts in this area in 2021, they will be significantly lower; fiscal space appears to be running out.”
China and the United States are leading the way toward a cyclical recovery. However, on a global scale, recovery is asynchronous and asymmetrical, with other markets like Latin America showing weak momentum that could become structural. MAPFRE economists have raised their forecasts for the US, from the 3.9% that they predicted at the start of 2021, to 6.6%, “due to record stimulus plans, unlike anything seen since the post-war period. This stimulus is being delivered to families in the form of checks and has therefore had an immediate impact on consumption and savings.” However, the report points to the effect of monetary policy on inflation and market interest rate levels—as well as the implications of this on issues in dollars in emerging countries—as a major risk.
China has shown the greatest strength out of the leading economies. It was the only country to show growth in 2020 (2%) and is expected to be one of the fastest growing powers this year too (MAPFRE Economics predicts growth of 8.9% this year, making it the first to return to pre-pandemic levels, followed by 5.2% in 2022). The economists add that: “China has benefited from being viewed as the world’s factory, in that its exports component has been very strong with an estimated growth of over 20% in the first quarter of 2021.”
The situation is different for the eurozone, meaning that recovery will take place at different speeds on either side of the Atlantic. Experts expect growth of 4% in 2021, compared to the 4.5% predicted at the end of last year, and 4.1% for 2022, “considering the prolonged restrictions, vaccination issues and the successive waves of the pandemic that persist in some countries, but also the first installments of EU funds, which are set to arrive in the second half of 2021.” Despite this reduced forecast, MAPFRE Economics considers the eurozone’s economic and sovereign risks to be contained by ample liquidity, low rates, ECB support and government stimulus programs.
In Latin America, Mexico records slow recovery, aided by the international context, with stable inflation and rates. “With respect to 2021 (for which MAPFRE Economics has improved its forecast by 1.5 points, to 4.9%), we believe that exports, and to a lesser extent investment, will be the most important drivers of activity. This will also be helped by the recovery of consumption, which, although falling short of 2019 levels, is expected to rise with the easing of restrictions,” they explain in the report. They also believe that the strong US recovery and oil prices will play in the economy’s favor.
By contrast, the pandemic continues to worsen in Brazil. This is in addition to currency volatility, which is being aggravated by market pressures and central bank interventions; a complex political context; and rising inflation that may prompt the central bank to increase rates. Despite this context, MAPFRE economists have revised their growth forecasts upward to 3.6% and 2.8% for 2021 and 2022, respectively “as a result of the re-introduction of emergency aid (40 billion Brazilian reais to enter the economy between April and July) and global economic recovery.”
Click here to read the full report (in Spanish)