Deutsche Bank upgraded its global growth outlook for 2021 but cautioned that two key risks could still spoil the economic recovery from the coronavirus crisis.
In the bank’s latest report out Wednesday — entitled “Hope on the horizon” — Deutsche Bank researchers updated their calls due to what it called “the incredibly positive” coronavirus vaccine news in recent weeks, with pharmaceutical giants Pfizer, Moderna and AstraZeneca all saying their vaccine candidates were highly effective at preventing Covid-19.
“With efficacy rates at the upper end of expectations, this opens up the possibility of a much more rapid return to normal than had been anticipated only a month ago,” Deutsche Bank’s Group Chief Economist David Folkerts-Landau noted. “By the end of 2021 it may no longer have much impact on day to day life,” he added in the report.
With a vaccine on the horizon, Deutsche Bank said “it is likely that global GDP (gross domestic product) will return to its pre-virus levels in the second quarter of next year.”
The house view is for global GDP to contract by 3.7% in 2020 with the U.S. economy shrinking by 3.6%, the euro zone seeing a contraction of 7.4% and China growing 2.2%.
In 2021, Deutsche Bank forecasts that the U.S. economy will grow 4%, the euro zone economy will rebound by 5.6% and China’s economy will gain 9.5%.
Two key risks
The German lender warned there are two key risks that could overcloud this scenario, however.
The first risk is the challenges posed by flattening the virus curve as winter sets in and possible delays in vaccine production, distribution and acceptance by the public — given the rise of anti-vaccination movements and mis-information in recent years.
Deutsche Bank expects widespread vaccination to begin by the first quarter of 2021 in advanced economies, and then to continue more widely in the second quarter. Yet, it said “the big unknown is whether the population will accept to be vaccinated and if the vaccine may be made mandatory.”
The second key risk emanates from possible financial disruption given that “central banks and fiscal authorities have taken aggressive actions, especially in the U.S. and Europe” to counter the economic crisis caused by the pandemic.
“We see an increasing risk of financial disruption down the road stemming from the growing overvaluation of assets and mounting debt levels driven by the necessary extremes to which monetary and fiscal policy stimulus have moved,” the researchers said.
Reference: CNBC
Thai
Eng