Best economic wishes for 2021

A return to normal by 2022

After promising clinical trials, the start of a global vaccination campaign is the ultimate Christmas miracle. This could boost our 2021 GDP forecasts: we expect a worldwide growth of +4.6% in 2021. The battle for herd immunity depends on a vaccine acceptance rate of 70-80%, and skepticism is particularly widespread in Western Europe. If governments can kick off a mass vaccination campaign in the second half of 2021, and herd immunity is visible before the end of the year, we could see a return to something resembling "business as usual” as early as Q4 2021.

Global trade flows going up

Impressive growth in China and lighter lockdowns in Europe, which preserved manufacturing activity, led to a strong recovery of global trade in goods in Q3 2020. In 2021, we’re wishing this continues. We do see competing dynamics in global trade albeit not implying the comeback of a brutal isolationism but rather pointing toward a new definition of global supply chains

Less political risk

After a year marked by the tumultuous US elections, we’re hoping 2021 will make geopolitics boring again. Global political risk was already at an extremely high level in 2019. The Covid-19 crisis is likely to further exacerbate these tensions. At last, political risk is also likely to increase in a context where global public debts have reached unsustainable levels, putting at risk the long-term viability of social protection systems.

No corporate insolvency tsunami

Our first best wish for the corporate sector would be an early end to lockdowns, combined with a fast materialization of positive confidence effects on consumption and investment. This would boost revenues and profits, especially for companies in the sectors sensitive to Covid-19, including household goods, food and beverages, leisure activities and automotive. These account for one out of four jobs in Western Europe. A faster-than-expected return to ‘business as usual’ would also reduce the risk of second-round effects on other sectors, with positive implications cyclical ones such as construction, energy, metals and machinery equipment.

Our second best wish for the corporate sector would be a timely, targeted and fine-tuned phasing out of the support measures put in place by governments. Indeed, the massive injection of liquidity into financial markets, the direct and indirect financial support and the temporary adjustments made to insolvency frameworks have helped prevent a tsunami of insolvencies in the short term. But a premature and unprepared withdrawal of financial measures could cause a liquidity squeeze at a time when companies will have to finance larger working capital requirements alongside the recovery. At the same time, delaying the withdrawal for too long could see a massive increase in zombie companies.

A green revolution

2021 will be a decisive year for climate change, marking the start of the sustainability wars in which Europe, the US and China will fight for global leadership in green technology. But with more climate disasters likely to unfold, we will need to start implementing negative emission strategies, beginning with large-scale afforestation and reinventing the construction sector to transform buildings into carbon sinks. Infrastructure spending in green investment and the digital network is likely to create a virtuous circle by increasing the growth potential of our economies over the medium to long run.