Rating agency lowers expectations for 2021 global GDP growth as new coronavirus cases surge

HOUSTON (ICIS)–A new surge of coronavirus (Covid-19) cases in the US and Europe – and the possible lockdown measures that could follow – drove S&P Global Ratings to lower its full year global GDP growth projection for 2021.

In a report released on Friday, the rating agency lowered its global forecast to 5.0% GDP growth for 2021 from its previous projection of 5.3%. The agency’s 2022-2023 GDP forecast was largely unchanged.

The outlook notes that “hope is on the horizon” with positive news on successful vaccines, but said risks to its baseline are on the downside as new lockdown measures could last longer than expected, governments may protect shrinking sectors and fight necessary structural change or may suffer from “stimulus fatigue” and end support too early.

In the US, S&P Global is forecasting 4.2% GDP growth for 2021.

Momentum is slowing from the robust recovery seen in the third quarter, the report said, but renewed lockdown measures are likely to be less restrictive than the first wave of mitigation efforts that largely brought the US economy to a halt earlier in the year.

“Other businesses such as manufacturing and construction remain operational, which is a key difference with the lockdowns imposed during the first wave at the beginning of the year,” S&P Global said.

The report also points out that the virus is generally under control in east Asia, and results are mixed in emerging markets.

The report said that despite the weaker outlook for the next few quarters, “the exit path from Covid-19 and the associated challenges is becoming clearer”.

New vaccines showing high efficacy in late-stage trials “should spell the beginning of the end of the crisis”.

This will lead to changes in how governments deal with the virus, including protecting the most vulnerable citizens in the hardest-hit areas, providing social safety nets and training opportunities, and ensuring adequate demand including through public investment to spur the recovery.

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