The world economy is facing a tougher-than-expected start to 2021 as coronavirus infections surge and it takes time to roll out vaccination programmes.

While global growth is still on course to rebound from the recession of 2020, it may take longer to ignite and not be as healthy as previously forecast. Already this month the World Bank has trimmed its prediction to 4% in 2021, while the IMF will update its own outlook this week.

Double-dip recessions are now expected in Japan, the eurozone and UK as restrictions to curb the virus’s spread are enforced. Record cases in the US are dragging on retail spending and hiring, prompting President Joe Biden’s new administration to seek an extra $1.9-trillion worth of fiscal stimulus.

Only China has managed a V-shaped recovery after containing the disease early, but even there consumers remain wary, with Beijing partly locked down.

High frequency indicators tracked by Bloomberg Economics point to a troubling start to the year, with advanced economies beginning on a weak note and emerging economies diverging.

“That’s a reflection of the hard reality that, ahead of widespread distribution of the vaccine, a return to normality is an unlikely prospect,” said Tom Orlik, chief economist at Bloomberg Economics.

It’s a stark outlook facing policymakers after $12-trillion worth of fiscal support and trillions in central bank money printing failed to cement a recovery. Policymakers from the US Federal Reserve will meet this week.

Even as the economic outlook has darkened as the weeks of 2021 ticked by, financial markets have continued to rally on optimism that government stimulus and the vaccine rollout will drive a recovery. Global stocks hit a record high last week.

The unevenness is likely to feature in remarks by global leaders scheduled to speak at an online event the World Economic Forum (WEF) is holding from Monday to January 29 instead of its usual meeting in the Swiss ski resort of Davos, including Chinese President Xi Jinping, his French counterpart Emmanuel Macron and German Chancellor Angela Merkel.

The US, Britain and EU are delivering vaccines, setting up a scenario in which some parts of the world reach herd immunity while others lag, hurting poorer economies.

“While there is light at the end of the tunnel, there is still a long and difficult road ahead before we are out,” said Erik Nielsen, group chief economist at Unicredit. “So long as the pandemic terrorises part of the world, normality will not be restored anywhere.”

The optimistic outlook rests on authorities getting the vaccine out on a material scale by midyear and neutering the threat of more transmissible variants of the virus. The ongoing provision of easy monetary policy and hope that governments won’t pull back their support prematurely — as some did after the financial crisis — should also assist.


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