Want to know what the next 12 months may hold – read on and see for yourself.
- The Economic Recovery Looks Good, But You Need To Be Cautious
The rate at which vaccines have rolled out has helped the global economic recovery in a big way. This fast rollout has helped lead to a very large increase in economic activity and it’s only expected to continue towards the end of the year. Because of this, the economic recovery is expected to be extremely fast compared to other periods throughout history where there was a global event like this. The majority of advanced economies throughout the world are expected to get to Gross Domestic Product (GDP) levels that they were at before the recession. The rising power of China is one to watch. Likewise, it is expected that the global annual economic growth rate will reach 6.1 percent in 2021 and 4.6 percent in 2022.
With that being said, these predictions are not accounting for any new mutations of the virus popping up. Having new strains of the virus could lead to global lockdowns and force the economic recovery to be much slower than anticipated. Because of this, Triodos fund managers are being extremely careful to avoid anything that could be considered a knock-on effect which includes the increase of interest rates that could crop up due to skyrocketing inflation.
- Consumer Spending Has Boosted Economies
The spending among households has increased for several months and it’s been followed by Japan and the Eurozone as many of the restrictions have been taken away. This has only increased globally with more and more local governments supporting the economy in more ways than one. The level of spending from the government is expected to slow down but private consumption is expected to ramp up as more and more consumers get increasingly confident in the economic recovery and as the labor market continues to see better days.
- There Is No Longer An Opportunity For An Economic Reset
While the overall strength of the economic recovery looks very promising, there is some skepticism when you look closely at the recovery. There have been unprecedented amounts of money that have been spent to try to counter the negative effects on the economy. This is a level of debt that has never been seen before. Because of this, the central bank balance sheets have gone off the rails. This has only increased the total vulnerability that can be seen within the entire economic system. While the emergency support that was provided to both businesses and households was completely necessary, it has resulted in extreme levels of debt.
A lot of the policy choices that were made have been more in favor of the older economic system. This system focused more on boosting the economy from increasing consumption. One could argue that there was a need for a rest that shouldn’t have been propelled by such spending. Rather, it should have been spurred by larger-scaled and more sustainable investments that had long-term growth potential in mind such as property development finance. This is something that hasn’t been done. Because of this, any boost to the economy this year and next is likely to be short-lived. After all, the money that has been spent hasn’t gone to infrastructure or other improvements that enhance the wellbeing of the population. At the same time, the economies have become increasingly vulnerable because the levels of public debt have only increased.
- Net Zero Targets Have Been Placed Under More Pressure
Since the early stages of the global pandemic, a lot of the support that has been offered by G7 countries to sectors involving energy has been granted to gas, oil, and coal companies. Because of this, there has been no acceleration to reaching net-zero emissions. This is something that is much needed and the entire globe is at risk because of the failure to do so. The report showcases that there needs to be a global effort and a lot of investment towards these clean technologies to make a successful transformation.
Because of the money needed, it’s going to be essential for funding to come from the private sector. However, it’s only going to do so when the government and the public sector put policies in place to accelerate the transition. The governments need to put more money towards green infrastructure and incentivize businesses to invest in it.
- An Increase In Inequality
The recession that has been caused by the global pandemic has only increased the gap between the have’s and the have-nots. The disparity between genders, age, income, and wealth has only widened. Those under 25 years of age, women, and low-income households have found themselves completely shut down for a long time as a lot of them work in the hospitality and leisure sectors. Likewise, anyone with flexible working contracts was typically worse off throughout the pandemic than those that had fixed contracts. The transition to digital services and telecommuting is only increasing the inequality between both high and low-income households.
Disclaimer: This content does not necessarily represent the views of IWB.
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