World Economic Prospects Monthly

Overview: Global activity starts to bounce back ▀ After a dire start to Q2 in April, the global economy has since staged a robust rebound as lockdown restrictions in many regions have eased. But despite a strong initial bounce, high unemployment and surging corporate debt will limit the scale of the revival in H2 and beyond. And the renewed rise in Covid‐19 cases in parts of the world shows that considerable downside risks remain. ▀ After persistently surprising sharply to the downside, global economic data have exceeded expectations over the past month or so. Retail sales staged a particularly sharp rebound in Europe and North America in May. ▀ The sharp post‐lockdown consumer spending bounce in response to the release of pent‐up demand, along with some evidence of a revival in industrial production and global trade, is clearly encouraging. In response we have raised our mid‐year GDP forecasts for a number of economies, including the US and China, pushing up our 2020 world GDP growth forecast by about 0.5pp to −4.5%. ▀ Nonetheless, the risk of a second Covid‐19 wave, the swathe of negative headlines about job redundancies and the scaling‐back of some government support measures before long in some countries suggest that the sharp rebound in activity seen so far may not persist for too long. ▀ As a result, the upward revision to our forecast for global activity in the shorter‐term is offset by a more cautious assessment of growth prospects next year. We now expect the level of global GDP at end‐2021 to be a touch lower than anticipated a month ago. Overall, we have cut our world GDP growth forecast for 2021 from 6.5% to 5.8%. ▀ Our baseline forecast assumes that a global second wave of Covid‐19 is avoided. But in this respect, the recent resurgence in cases in some countries (and in some US states in particular) is a clear worry. Risks to our baseline forecast remain firmly tilted to the downside.