US and China driving global Covid recovery – leading macroeconomic influencers

8 April 2021 (Last Updated April 8th, 2021 16:38)

US and China driving global Covid recovery – leading macroeconomic influencers
The world’s first Covid-19 vaccine has been approved. Credit: Shutterstock.

Economists believe that stimulus spending in advanced economies and the accelerated pace of Covid-19 vaccinations will help the world economy to grow faster than ever in 2021.

John Ashcroft

John Ashcroft, an economist, shared an article on the International Monetary Fund (IMF) lifting global forecasts for 2021 to 6%, the fastest ever in four decades, as vaccine rollouts accelerate, and advanced economies spend aggressively to fight the Covid-19 pandemic and related lockdowns.

The IMF has altered its projection of the world economy growing at 6% this year, the most since 1980, and as compared to the 5.5% growth forecasted in January. According to IMF data, the coronavirus pandemic cut global output by an approximately 3.3% in 2020, the worst since the Great Depression.

Economists believe that countries such as the US and China are driving the global recovery. The US economy is forecasted to expand 6.4% in 2021 and return to its pre-pandemic levels after an estimated drop of 3.5% last year. The IMF had earlier forecasted a US growth of 5.1% in 2021. On the contrary, China’s economy is forecasted to expand 8.4% this year, up from an earlier projection of 8.1%.

Washington is estimated to spend roughly $5tn since March last year to battle the Covid-19 crisis and its economic outcomes, including the $1.9tn relief package approved in March this year. The Federal Reserve and other advanced economies such as the UK, Japan, and the European Union (EU) have adopted strategies such as the slashing of short-term interest rates almost to zero while buying trillions of dollars in securities.

Christophe Barraud

Christophe Barraud, an economist, tweeted on a new double mutant variant of the SARS-CoV-2 virus having been detected in India and how amidst a second wave of the Covid-19 crisis, events such as the months-long Kumbh Mela took place. Citing a 1.1% drop in the Indian rupee to 74.2201 per USD, Barraud claims that it is the weakest since 23 November 2020.

Barraud refers to a Goldman Sachs projection which downgrades India’s growth forecast as Covid cases spike. The investment bank lowered the country’s growth forecast for the second quarter of 2021 from 34% year-on-year to 31.3%. India reported over 100,000 new coronavirus infections over a 24-hour period on Monday, surpassing peak numbers reported in September last year. The country registered more than 96,000 infected individuals on the following day.

The second wave of Covid-19 infections is expected to slow India’s pandemic-induced economic recovery, with states and federal governments ramping up local restrictions and curfews and allowing only essential services to remain open to battle the new outbreak. State authorities are also worried about the shortage of beds in hospitals and doctors.

Armine Yalnizyan

Canadian economist, Armine Yalnizyan, retweeted on how this is the first economic recession in history that is driven by women’s job losses in the service industry. She coined the term she-cession to describe the pandemic-induced recession, which is not expected to get better if women do not get back to work and if childcare support systems are not in place for working parents.

According to Statistics Canada, women outnumbered men in Covid-19-related job losses with employment falling between by 16.9% for women as compared to 14.6% for men for the period between February and April last year. As many as two million Canadians and more became jobless in April, and unlike other recessions, women workers who largely constitute the retail and services workforce were particularly hit.

Yalnizyan says the government has finally begun to recognise the connection between childcare support and the economy. She believes that without a plan for free or low-cost childcare, women could once again fall behind.