The recovery of the global economy is still very much dependent on the rate of vaccination and the possible emergence of new variants of COVID-19 that could put growth in check for this year. Gonzalo de Cadenas-Santiago, Director of Macroeconomics and Financial Analysis at MAPFRE Economics, notes, in an interview with Capital Radio (Spain), that the solution lies with India. India is currently experiencing its worst crisis since the outbreak of the pandemic: “Until the country’s entire population is vaccinated, the global recovery will be greatly hindered.”
According to analysis in the recent Economic and Industry Outlook report from MAPFRE Economics, growth appears to be occurring at different speeds in different countries. “There is an unevenness to the global exit from the crisis as a result of the vaccination campaign, the economic policies being drawn up and the structural difficulties faced by emerging countries.” These difficulties mentioned by the expert coincide with the Sustainable Development Goals of the United Nations. In this regard, limited access to education in countries with fewer resources and inclement weather that may become more severe as a result of climate change are two of the issues identified by the UN, which have been exacerbated by the coronavirus and whose resolution looks to be delayed as a result: “Unfortunately, COVID-19 means these challenges are being treated as secondary, but they remain extremely serious.”
However the economist assesses that light will appear at the end of the tunnel this year, sooner or later depending on where you are, but as the result a single strategy: “We will overcome the virus through international action, and the moderate, temporary inflation will decline, so the pace of recovery will remain strong.” He also notes that savings rates will return to more normal levels and investment will recover.
Taking a rosier view of the economic situation, the savings front is slightly more nuanced. And Spain, with a “financial repression” stemming from the crisis, is encountering cash savings, “which are inert and not mediated by the finance sector,” to avoid them being channeled to investment.
At European level, and looking at the Next Generation EU funds, the analyst believes that good use should be made of these funds to enhance the digitization of companies and modernize the Spanish economy. However, in order to take advantage of this opportunity, he says a number of fiscal and labor reforms are needed that will require consensus at the national level. “These reforms have to be geared toward better taxation. It would be a mistake to stifle the small entrepreneur even further,” Gonzalo adds.
Ultimately, with better than expected forecasts for this year, insurance goes hand in hand with the challenges of the future, “because its raison d’être lies in the mutualization” of those objectives. In this regard, early estimates mostly pointed toward a more general decline in the sector, although the most recent forecasts indicate that certain insurance businesses will grow throughout 2021 “because of their elasticity.”