Policy Research Office of the National Development and Reform Commission
Affected by the global pandemic of the COVID-19 pandemic, the world economy fell into the worst recession since the Great Depression in 2020.
Major economies have successively introduced large-scale response policies to promote a rebound in the world economy in the second half of the year.
However, in the fourth quarter, the pandemic in Europe and the United States broke out again on a large scale, and the momentum of world economic recovery was affected to a certain extent. . Looking forward to 2021, the world economic situation is still complex and severe.
Major economies will continue to be easing their policy orientation, the global coverage of coronavirus vaccination will continue to increase, and the world economy is expected to show recovery growth, but the trend of the pandemic is still strong uncertain, and all kinds of derivative risks caused by the impact of the pandemic are not acceptable.
Ignoringly, the debt level has risen sharply, the macro-policy space is limited, and structural institutional contradictions have been further highlighted. The world economic recovery is still unstable and uneven, and medium- and long-term growth is still facing strong risks and challenges.
I. The world economy is expected to continue the low recovery in 2021.
Since the third quarter of 2020, the economic growth rate of major economies has rebounded.
Major international economic organizations have slightly raised their world economic growth forecasts in 2020, and it is expected that the world economy will continue to rebound at a low level in 2021.
The World Bank and the International Monetary Fund (IMF) predict 202 respectively. The world economy will decline by 4.3% and 3.5% in 0, and will grow by 4.0% and 5.5% in 2021.
First, the recovery situation of developed economies has been divided.
The IMF expects the GDP of developed economies to decline by 4.9% in 2020 and 4.3% in 2021. The economic recovery of the United States has some support.
Driven by large-scale easing policies, the U.S. economy continued to recover in the second half of 2020, and the confidence of market subjects gradually recovered. Since August, the Purchasing Managers Index (PMI) of Manufacturing and Services Services has remained above 55, and GDP increased by 33.4% month-on-month in the third quarter, down 2.9% year-on-year.
Compared with the year-on-year decline of 9% in the second quarter, the economy is relatively resilient in developed economies. The U.S. government is expected to promote a new round of large-scale support policies to respond to the pandemic, which is objectively conducive to supporting economic recovery.
The IMF expects the U.S. economy to decline by 3.4% in 2020 and 5.1% in 2021. European economic recovery is more difficult. The European economy has been strongly impacted by the pandemic, the service industry has been shut down on a large scale, investment consumption has fallen sharply, and the unemployment rate has exceeded 8%.
The EU economy fell by 14% and 4.2% year-on-year in the second and third quarters of 2020. Since the fourth quarter, the pandemic situation in Europe has become more severe.
Countries have resumed large-scale blockade policies one after another, and the economy may have a “double-dip recession”, which will decline significantly in major economies.
The IMF expects the eurozone and UK economies to fall by 7.2% and 10% respectively in 2020, and 4.2% and 4.5% in 2021, respectively. Japan’s economic prospects are still relatively weak.
Japan’s pandemic trend is relatively controllable, and the supply chain of the industrial chain in East Asia is closely linked. Japan’s economy is driven by the strong recovery of China’s economic stability.
In the third quarter of 2020, the economy grew by 21.4% month-on-year and decreased by 5.7% year-on-year, up from the year-year decline of 10.3% in the second quarter
but the Tokyo Olympics It will have a strong impact on investment and consumption, and superimpose with long-standing structural contradictions such as insufficient total social demand and aging population.
The future trend is still not optimistic. The IMF expects Japan’s economy to decline by 5.1% in 2020 and 3.1% in 2021.
Second, emerging economies face more difficulties in recovery.
The impact of the pandemic on emerging economies has generally exceeded expectations.
The pandemic situation in major emerging economies such as India, Brazil, Russia and South Africa continues to spread, and economic operation has been seriously impacted.
The unemployment rate has risen significantly. It is generally facing strong challenges such as the decline in trade imports and exports, the depreciation of the local currency, capital outflow, and increased pressure on overseas debt.
The country The international balance and expenditure situation is getting worse, coupled with the lagging behind that of developed economies, which poses obvious constraints on economic recovery.
The IMF expects that the economies of emerging economies and developing countries will decline by 2.4% in 2020 and 6.3% in 2021.
Among them, China will play an important driving role. It is expected that India, Brazil, Russia and South Africa’s GDP will decline by 8%, 4.5%, 3.6% and 7.5% in 2020. 5%, in 2021, it will increase by 11.5%, 3.6%, 3% and 2.8% respectively.
Third, the recovery of global trade and investment will be relatively slow.
Under the impact of the pandemic, countries have adopted measures such as personnel entry and exit control and transportation restrictions.
Global production, trade and investment activities have plummeted, the supply and demand cycle of the world economy have been blocked, and the regionalization and localization of the supply chain of the industrial chain have become more obvious.
The IMF expects global trade volume to decline by 9.6% in 2020 and recover from 8.1% in 2021. Global foreign direct investment (FDI) has also been strongly affected by the pandemic and protectionist measures in various countries.
According to UNCTAD data, global FDI fell by 42% in 2020, falling below $1 trillion for the first time in 15 years. Affected by the uncertainty of the pandemic trend, it is expected that global FDI will still be Overall downturn.
Fourth, the international financial market and commodity market fluctuated and rebounded.
The spillover effect of large-scale easing policies is obvious, supporting a sharp rise in global asset prices. Global stock markets rebounded sharply.
After a sharp decline in the beginning of 2020, the world’s major stock indexes rebounded rapidly under the support of a loose liquidity environment, achieving a large increase throughout the year. U.S. stocks experienced four rare meltdowns in the first quarter of 2020, which once reached nearly 35%.
Subsequently, the Federal Reserve launched an unlimited asset purchase plan to directly hold corporate bonds to boost the stability of the capital market. The Dow Jones Industrial Index rose 7.2% throughout the year and the S&P 500 index rose 16.2%. , the Nasdaq index rose 43.6%.
The Nikkei 225 index rose 16% in 2020, the South Korean Composite Index rose 30.7%, the German DAX index rose 3.5%, and the British and French stock index also rebounded significantly against the previous lows. Commodity prices are rebounding significantly.
The Reuters CRB Commodity Index has fallen to a low of about 110 points since about 190 points before the pandemic in early 2020, and has rebounded to about 175 points.
The spot index of Reuters CRB metals, food and edible oils has reached about 990 points, 370 points and 430 points respectively, all of which are significantly higher than the levels of about 760 points, 340 points and 370 points at the beginning of 2020.
The price of crude oil futures on the New York Mercantile Exchange has fallen to about $22 per barrel from about $65 per barrel at the beginning of 2020 and has now recovered to about $53 per barrel.
With the global economic recovery combined with easing liquidity, there is still room for further upward movement in commodity prices in the future.
II. The global easing policy environment may continue in 2021.
After the outbreak of the pandemic, major economies have introduced large-scale fiscal and monetary stimulus policies.
At present, the global economy continues to be in a downturn, and major economies are still expected to continue to implement easing policies, and it is difficult to turn sharply in the short term. Global reinflation expectations have strengthened against the backdrop of easing policies.
The IMF expects that the inflation level in developed economies will be 1.3% in 2021, higher than the level of 0.7% in 2020, but still below the target inflation level. There is still room for loose policies.
First, the United States promotes a new round of financial support policies to deal with the pandemic.
The total amount of financial support policy in the United States to deal with the pandemic has reached nearly $4 trillion, and it is accelerating the promotion of a new round of fiscal support policies totaling $1.9 trillion, which will be mainly used to fight the pandemic, provide relief subsidies for residents, and support small and medium-sized enterprises and state governments.
At the same time, monetary policy will remain relatively loose. The Federal Reserve’s interest rate meeting in December 2020 will keep the federal funds target interest rate of 0-0.25% unchanged, and will increase its holdings of $80 billion of U.S. Treasury bonds and $40 billion of mortgage-backed bonds every month.
In the easing policy environment, the depreciation of the US dollar is expected to strengthen. The dollar index has dropped from about 99 at the beginning of 2020 to about 90 at present, and the price of anti-inflation assets such as gold has risen significantly.
Second, the European Union and Japan further expand their support for easing policies.
The trend of the pandemic in Europe is not optimistic. Countries have generally implemented large-scale fiscal stimulus policies. France, Germany, Italy, Spain and the United Kingdom have accounted for 20.9%, 39.1%, 37.9%, 17.7% and 25.8% of their GDP, respectively.
The EU-level fiscal stimulus reached 10.7% of its GDP and officially adopted a new round of fiscal support plan totaling 750 billion euros to deal with the pandemic in December 2020, including $390 billion in unpaid grants and 360 billion euros in low-interest loans.
The European Central Bank has maintained zero interest rates for a long time. Recently, it extended its asset purchase plan to respond to the pandemic until March 2022 and expanded its scale from 500 billion euros to 1.85 trillion euros. The total fiscal stimulus policy of the Japanese government in the early stage has accounted for 35% of its GDP.
In December 2020, it further launched an economic stimulus plan totaling 73.6 trillion yen, accounting for 13.1% of its GDP, including further effective measures to control the spread of the pandemic and extending the early response to the pandemic.
Preferential loan terms to promote structural reforms to promote economic recovery in the post-pandemic period. In addition, the Bank of Japan will continue its large-scale asset purchase program.
Third, emerging economies pay more attention to the role of loose monetary policy.
Limited by their own fiscal capacity, the scale of fiscal stimulus in emerging economies is relatively limited. India, Brazil, Russia and South Africa account for 7%, 14.6%, 3.4% and 9.6% of their GDP, respectively, which is significantly lower than that of developed economies.
With relatively sufficient monetary policy space, emerging economies generally adopt loose monetary policies such as interest rate cuts and asset purchases to support the economy.
Since the outbreak of the pandemic, India, Brazil, Russia and South Africa have cut interest rates by 115, 125, 175 and 275 basis points respectively, cutting the benchmark interest rate to 4.0%.
3.0%, 5.25%, 3.5%, under the situation of strong easing expectations of major global central banks such as the Federal Reserve, there is still some room for interest rates in emerging economies in the future.
III. Unbalanced development, instability and uncertainty restrict the recovery of the world economy
At present, the uncertainty of the global pandemic trend is still strong, and various derivative risks brought about by the impact of the pandemic continue to highlight.
The intensity of stimulus policies in various countries is more forced by the rise of macro-indebted levels. Long-standing structural contradictions have been further exposed in the pandemic, and the global economic recovery is still facing strong risk challenges.
First, the differences in vaccination among countries may increase the imbalance between pandemic prevention and control and economic recovery.
After the northern hemisphere entered autumn and winter, the global pandemic broke out again on a large scale. At present, the cumulative number of people infected with the novel coronavirus worldwide exceeds 100 million, and the death toll exceeds 2.15 million. The speed of vaccination has a key impact on the development of the pandemic.
At present, the global vaccine production capacity cannot fully meet the market demand.
Affected by vaccine supply, transportation conditions, vaccination capacity, vaccination willingness and other factors, the vaccination situation in different countries and populations may be significantly differentiated, which is not conducive to the simultaneous recovery of the world economy.
High-income countries are expected to complete vaccination for key populations in the first quarter of 2021, which will help promote economic recovery.
Low- and middle-income countries generally face the challenge of insufficient vaccine supply, and there is a high risk of the continuous spread of the pandemic.
It is difficult to fully restore the economic and social operation order in the short term. The World Health Organization expects that vaccines will need to be widely vaccinated worldwide at least until mid-2021.
The IMF predicts that if the global pandemic prevention and control situation deteriorates again, the global economic growth rate may be cut by 0.75 percentage points from the benchmark scenario in 2021.
The gap between the North and South, which developed and developing countries, will widen with the spread of the pandemic and sluggish growth.
Second, the continuous rise in global debt has exacerbated the instability of the international financial system.
The balance sheets of central banks in developed economies continue to expand. At present, the benchmark interest rates of major developed economies are negative or zero.
Loose monetary policy mainly relies on balance sheet expansion, but its balance sheet size is already large, which will restrict further expansion space.
The balance sheet of the Federal Reserve has risen from about $4.2 trillion before the pandemic to about $7.4 trillion, of which U.S. Treasury bonds account for more than 60% of the total assets of the Federal Reserve, and the monetization trend of fiscal deficits has emerged.
The balance sheet of the European Central Bank has risen from about 4.7 trillion euros before the pandemic to about 7 trillion euros now.
The balance sheet of the Bank of Japan has risen from about 573 trillion yen before the pandemic to about 700 trillion yen now, reaching 130% of its GDP. The government debt of developed economies is rising rapidly.
Developed economies have large-scale economic stimulus policies, and are now generally facing strong pressure from reduced fiscal revenue and increased debt burden.
The U.S. fiscal deficit in fiscal year 2020 reached $3.3 trillion, accounting for 16% of GDP, the highest level since World War II, and Fitch ratings have downgraded the U.S. sovereign credit outlook from “stable” to “negative”.
The U.S. Congressional Budget Office estimates that the space for fiscal stimulus policies will tend to narrow in the future, and the U.S. fiscal deficit as a proportion of GDP will be 8.6% and 6.1% in 2021 and 2022, respectively.
The IMF expects that the government debt of developed economies will reach an all-time high of 125% of GDP by the end of 2021. Some emerging economies have the risk of sovereign debt default.
Some emerging economies rely on resource exports and tourism, economic performance and balance of payments have been greatly affected by the pandemic, and the debt problems that already existed in the early stage are more prominent. The IMF expects that the government debt of emerging economies will reach 65% of GDP by the end of 2021.
Since 2020, Argentina, Ecuador, Zambia and other countries have defaulted on sovereign debt. The pressure on residents to pay off debts continues to increase.
According to the Bank for International Settlements, as of the second quarter of 2020, household debt of G20 members as a share of GDP reached 62.8%, which is at an all-time high.
The pandemic has led to high unemployment and further widened the gap between rich and poor. With the gradual withdrawal of future bailout policies, the risk of default on residents’ debt may be exposed on a large scale.
Third, the instability of financial and real estate markets exacerbates bubble risk.
The valuation of the stock market is at an all-time high. In a loose liquidity environment, a large number of low-cost funds are chasing high-yield assets.
Apple, Amazon, Tesla and other large technology stocks have risen sharply, rising 88%, 106% and 680% respectively in 2020. The rolling price-earnings ratio (TTM) of the Nasdaq Index in the United States has reached 57 times, ranking among the world’s main Market first.
Bitcoin and so on have become new investment speculation hotspots. Bitcoin rose rapidly from about $5,000 at the beginning of 2020 to about $43,000, and has since fallen back.
At present, it is still at a high level of about $30,000, with significant speculative characteristics and serious risk of bubbles. The ChaiNext5 index, which reflects the price trend of the market’s major digital currencies, has fluctuated from about 360 points at the beginning of 2020 to about 2,500 points at present. Global house prices have risen overall.
Before the pandemic, global housing prices have been at an all-time high. Under the relaxed policy environment after the pandemic, long-term loan interest rates fell, and the cost of buying a house decreased, which further stimulated housing demand and promoted the global housing prices to generally rise rapidly.
In the third quarter of 2020, housing prices in 56 major economies around the world rose by an average of 4.5% year-on-year. The United States and Germany rose 7% and 7.8% respectively.
Fourth, the contradictions of structural imbalances highlight the constraints on the resumption of growth in the world economy.
The support of economic recovery elements is still unstable and unbalanced. Under the influence of the pandemic, the long-standing structural contradictions in the world economy have been further highlighted.
The social income gap in various countries has widened, the investment rate has fallen significantly, and the expenditure on education research and development has been squeezed, which will slow down the potential growth rate of the economy. Emerging economies and developing countries have been particularly hit hard.
According to the World Bank forecast, the average investment growth rate will decline to 2.7% in the next decade, and the secondary education completion rate may fall to 30%. The two factors will lower the potential economic growth rate by 0.4 and 0.2 percentage points, respectively.
The global population is deepening, and the United Nations expects that the proportion of the global population over 65 years old will increase from the current 9.1% to 11.7% by 2030, which is not conducive to increased labor productivity. Uncertainty in the development environment has increased.
More than 50% of emerging economies and developing countries affected by the pandemic have lower per capita incomes than five years ago, and about 100 million people around the world have returned to extreme poverty, affecting the achievement of the United Nations Sustainable Development Goals 2030.
Low- and middle-income groups in various countries have been greatly affected by the pandemic, and medical security for vulnerable groups is insufficient. Social contradictions in some countries have intensified, and ethnic antagonism and political struggles have intensified.
Brexit has increased the uncertainty of European political and economic trends, geopolitical conflicts in hot spots such as the Middle East are still frequent, and terrorist and extremist forces have risen. The growth rate of the world economy in the post-pandemic period will be down from that before the pandemic.
The World Bank predicts that the potential global growth rate in the next 10 years will be 0.3 percentage points lower than the pre-pandemic forecast, of which 0.6 percentage points will be lower in emerging economies and developing countries, and the total output of developed, emerging and developing countries will be 3 percentage points lower than the pre-pandemic forecast by 2022. .2%, 6%.
The IMF expects that the growth rate of the world economy will decline to 3.5% by 2025, among which the average growth rate of developed and emerging economies will decline to 1.7% and 4.7%, respectively, which is lower than the average growth rate of 3.6%, 1.9% and 5.0% in 2011-2017. All parties urgently need to pass the deep Structural reform, strengthening international macroeconomic policy coordination, and promoting medium- and long-term stable growth of the world economy.