In 2020 the global economy fell into recession with a reported contraction of 4.3%. This contraction brought about by the far-reaching effects of the Covid-19 pandemic resulted in the fourth most severe global recession in the past 150 years. Despite the pandemic’s detrimental effects and the deep recession, the Global Economic Prospects report released by The World Bank expects the global economy to recover in 2021.
Subdued Growth Projections
Despite global economic output recovery, the growth rate will remain below pre-pandemic trends for an extended period. Financial analysts project that the worldwide output will expand by 4% in 2021.
The global output projections derived from both advanced and developing economies:
- American GDP fell by 3.6% in 2020 and is forecast to expand 3.5% in 2021.
- Europe’s output declined by 7.4% in 2020, while its anticipated growth is 3.6% this year.
- Japan’s activity shrank by 5.3% in 2020, with forecasts indicating 2.5% growth in 2021.
Emerging markets and developing economies
Aggregate GDP in developing economies and emerging markets (including China) is forecast to grow by an average of 5% in 2021 after it shrank 2.6% in 2020.
- China’s GDP shrank 3.5% in 2020 but is forecast to expand to 8.4% this year.
- Emerging markets and developing economies (excluding China) experienced a contraction of 5% in 2020 but are forecast to expand 3.4% in 2021.
- Low-income economies’ GDP contracted 0.9% in 2020 and is forecast to increase by 3.3% in 2021.
Debt Accumulation Affects Global Growth
Projections also indicate that there will be a long-expected dropoff in potential global growth over the next ten years. According to the World Bank, Covid-19 has exacerbated the risks associated with a decade-long wave of global debt accumulation.
Debt sustainability is worrying due to the sheer magnitude and speed of the recent debt buildup. Certain economies may consider debt to facilitate growth-enhancing investments, while the pandemic has also forced large-scale borrowing to finance essential support measures. Furthermore, hard-hit countries may need debt relief to support their crisis-stricken economies and their most vulnerable populations.
Who is driving growth?
China and the United States are gearing up to be the most prominent global growth drivers in 2021.
Business investment and household consumption have dramatically increased in these economies, with private-sector confidence and positive sentiment directly influencing the marked increase in investment.
Furthermore, commodity prices and international trade firmed up thanks to industrial production rebounding from the pandemic’s effects.
The United States
The United States economy will experience rapid GDP growth based on its large-scale fiscal stimulus and loose monetary policies. Following renewed consumer and business confidence, consumption and investment growth is positive while financial markets’ performance is satisfactory.
China’s projected growth is due to the government’s shift to macroeconomic-policy normalization with the containment of financial-system risks and medium-term structural issues. The National People’s Congress prompted a renewed focus on shifting output growth sources towards small and medium-sized enterprises, the service sector, and high-end manufacturing, along with a rebalanced demand towards household consumption.
Other major economies
Forecasts indicate that the only major economies to exceed pre-pandemic GDP levels by the end of 2021 are China, the United States, India, Indonesia, and South Korea. The remaining regions’ GDP and employment rates will, in all likelihood, suffer from the 2020 recession.
Which industries grew during the pandemic?
According to new data from IBM’s U.S. Retail Index, the pandemic has accelerated the shift from physical stores to online shopping by approximately five years. Not only have consumers embraced online services such as Zoom, Amazon, and Netflix, but there has also been a spike in online gambling as opposed to gambling in physical casinos.
The Business Research Company reports that the online gambling market size will grow by 12.0%, from $58.96 billion in 2019 to $92.86 billion in 2023. Increased online gambling spending in the USA resulted from social distancing restrictions of brick-and-mortar casinos, intensified marketing by online casinos and sportsbooks, and online gambling legalization in certain states.
The report also shed light on the adoption rates of online casinos during the pandemic. Figures reveal that there were thousands of new online casino registrations daily, and the online betting frequency increased.
Several countries took the opportunity to amend their online gambling laws to bolster the economy with gambling-related tax income. Belarus legalized online casinos, while Armenia made changes to its existing gambling laws.
Wrapping it up
Online services, fiscal support measures, and viable financial policies are critical to ensuring that economic growth remains feasible. For robust recovery, policymakers need to ensure that resolute measures are put in place to control the spread of Covid-19 along with balanced monetary policies to improve productivity and fiscal stimulus to boost demand. Furthermore, debt relief may be necessary for hard-hit economies to support their most vulnerable populations.
About the Author – Hein Sondag
Hein has worked in the online casino and sports betting industries for over ten years. A wild man at heart with a passion for writing about what matters most about betting – turning a profit while enjoying the gameplay. He’s an avid fan of horse racing, baccarat, and the slots industry’s latest developments. When he’s not keeping tabs on the latest online casino developments and writing for Online United States Casinos, he’s cycling, hiking, and swimming with sharks.