Thursday 28 Mar 2024
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KUALA LUMPUR (Sept 23): After a 3.4% decline in 2020, world real gross domestic product (GDP) growth is projected to reach 5.6% in 2021 and 4.5% in 2022, led by strong recoveries in consumer spending and business investment.

In the IHS Markit September Global Economic Forecast Flash today, IHS Markit global economics executive director Sara Johnson said the forecast of global growth was revised downwards this month by 0.1 percentage point for this year, owing to a weaker third-quarter (3Q21) performance in the US.

“Global growth will settle to 3.4% in 2023 and 3.2% in 2024 as pent-up demands are satisfied and major economies return to full employment,” she said.

Johnson said global economic expansion lost momentum in 3Q21 as new waves of the Covid-19 virus dampened consumer sentiment and idled production.

She said with new Covid-19 cases now falling and vaccination rising in most regions, global growth is set to strengthen to a 5% to 6% annual rate in late 2021 and early 2022, led by a strong rebound in Asia-Pacific.

“Growth will pick up across the Americas but moderate from exceptional mid-2021 rates in Western Europe.

“Over the course of 2022, global real GDP growth will downshift from the above-trend rates that are characteristic of the early stages of an expansion to more sustainable rates near 3%,” she said.

Johnson explained that the withdrawal of massive fiscal stimuli deployed during the pandemic will contribute to this deceleration.

She said that globally, government deficits are projected to narrow from 9.4% of GDP in 2020 to 6.4% of GDP this year and 3.8% of GDP in 2022.

“Inflationary pressures will dampen spending on supply-constrained products and contribute to increases in long-term interest rates,” she said.

Johnson also pointed out that supply chain disruptions raise costs and delay growth.

She said the IHS Markit Purchasing Managers’ Index (PMI) surveys through August indicated record-high delivery times for manufacturing inputs.

“These supply delays are driving up prices and curbing output in many sectors — especially autos, construction, industrial equipment and technology.

“Semiconductor shortages continue to depress global auto production, resulting in depleted dealer inventories and reduced sales,” she said.

IHS Markit automotive experts forecast that global light vehicle production, after falling from 89 million units in 2019 to 74.6 million in 2020, will recover to only 75.8 million units this year and 82.6 million in 2022.

It will be 2024 before production surpasses its 2017 high of 95.1 million units.

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