Good morning!
Canada administered its first coronavirus vaccines on Monday — a historic day that would hopefully mark the end of this dreadful global health and economic crisis.
It’s early days, but vaccine deployment in the UK and U.S. also went off smoothly, sparking new hope for the global economy that has been decimated by the virus.
Oxford Economics believes the smooth rollout of vaccines could serve as a US$5 trillion booster shot for the global economy that would help repair the global economy, bring people back into the employment fold and rebuild the battered services and manufacturing sectors.
“Global GDP could be boosted by US$2.3 trillion in 2021 and US$2.7 trillion in 2022 in a rapid upturn scenario in which vaccine breakthroughs and post-election U.S. stimulus combine to cement near-term recovery,” Jamie Thompson, head of macro scenarios at the UK-based research house, said in a note to clients.
Global GDP could rebound 4.9 per cent in 2021, compared to a 4.2 per cent contraction in 2020, according to Oxford’s baseline forecast. Canadian GDP growth would match global expansion in 2021 with a 4.9 per cent increase in economic activity.
On the flip side, complications with the rollouts or even with the vaccines themselves could see the global economy take a US$1.1 trillion hit, leading to delayed global recovery.
“And in the event of a further near-term surge in infections and global lockdown, we find that the global economy would be as much as US$3.3 trillion smaller than in our baseline forecast in the year ahead,” Oxford said in its report.
Almost three-quarters of businesses surveyed by Oxford had become more positive over the past month — the greatest improvement in sentiment seen so far during the pandemic. Still businesses remain wary of what’s in store for them in 2021 — and you could hardly blame them given the Black Swan event that broadsided them this year .
“Business caution over the implications of recent vaccine breakthroughs is striking. Our latest survey evidence suggests that most businesses see a delayed recovery, in which social distancing remains in place in 2021 amid slow progress in the rollout of mass vaccinations, as more likely than a rapid upturn on the back of positive vaccine developments,” Thompson said.
Despite the caution, one can’t help being caught up in a bout of optimism for next year.
With vaccines on their way, the downturn in Canadian economic activity is expected to prove shorter and shallower than in the early half of 2020, Royal Bank of Canada economists believe.
“That will help the recovery in hard-hit sectors like accommodation and food services, travel, and arts and entertainment where activity remains well below pre-pandemic levels. And we could see the release of some pent up savings—household personal deposits were up 13 per cent year-over-year, or $134 billion, in Q3—as consumers have more opportunities to go out and spend.”
The bank revised upwards its 2021 Q4/Q4 GDP forecast from 4.2 per cent to 6.5 per cent, largely due to a stronger recovery over the second half of next year.
“That would mean GDP rising above pre-pandemic levels by the end of next year, and the output gap closing (i.e. the economy returning to full capacity) sometime around mid-2022,” the bank said.
December 15, 2020 at 09:47PM
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Posthaste: Smooth vaccine rollouts could serve as a $5-trillion booster shot for the global economy - Financial Post
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