KUALA LUMPUR: Global real gross domestic product (GDP) is likely to rebound 5.0 per cent in 2021 following a record 4.0 per cent contraction in 2020, said Moody's Analytics.
The financial intelligence company said the steady increase in the global Covid-19 infections curve, which has led to renewed shutdowns across parts of North America, Europe and Asia, posed a downside risk.
"The economic recovery will accelerate as Covid-19 vaccine dissemination ramps up worldwide, especially in the developed countries. As the virus retreats during 2021, global economic growth will gain momentum," Moody's Analytics said in a report today.
The firm said the global economic recovery would remain moderate until vaccines were widely distributed.
"Ongoing support from governments and central banks will be key to propping up domestic demand as economies navigate the recovery in 2021."
After a soft end to 2020 and a difficult start to the new year, Moody's Analytics said the global economic recovery was projected to gain momentum through 2021, supported by the vaccine rollout.
Global economic activity slowed sharply in the final months of 2020 amid a resurgence in daily Covid-19 infections and the reinstatement of localised lockdown restrictions in North America and Europe.
"Asiaʼs robust economic recovery has also slowed amid the recent rise in new cases in a number of major cities," it said.
The Moodyʼs Analytics baseline epidemiological assumptions anticipated that new daily infections will peak in January.
However, the near-term outlook is clouded in uncertainty as the trajectory of the coronavirus pandemic remains highly uncertain.
"Additional waves of new infections prior to broad vaccine distribution would weigh heavily on the economic recovery."
Although governments in many countries are constrained by lack of fiscal space, major central banks remain prepared to do whatever it takes to support the recovery.
"Interest rates are likely to remain at rock bottom for the next few years, and credit facilities are unlikely to be wound down any time soon.
"As there is little risk of an early removal of stimulus, the odds of a policy error by a major central bank are low."
Moody's Analytics said Asia Pacic had outperformed the other regions in 2020, although recent Covid-19 outbreaks in a number of Asian cities would drag on the pace of recovery in the opening months of the year.
Japan and Korea have been battling a third wave of infections, with the former recently imposing a month long state of emergency in Tokyo and a growing number of other prefectures, impacting a large share of the population.
"Rising infections and restrictions in parts of Southeast Asia, including Indonesia, the Philippines and Malaysia, will also drag on the pace of recovery of the regionʼs emerging economies," it added.