The World: While momentum in early 2021 will be curtailed in some countries by tougher restrictions amid the spread of new Covid-19 variants, the global economy should rebound later in the year on supportive fiscal policy and a quickening vaccine rollout. Potential vaccine resistant strains of the virus, logistical problems in the rollout and U.S.-China tensions pose downside risks.
Canada: The economy is set to rebound strongly this year, following 2020’s sharp downturn. Pent-up demand and heightened household savings should support private spending, while strong fiscal and monetary stimulus should stoke investment activity. However, uncertainty surrounding the vaccine rollout, new variants of the virus and the evolution of commodity prices cloud the outlook.
Euro Area: GDP is set to rebound this year amid the gradual lifting of restrictions. Supportive fiscal and monetary policies, unleashed pent-up demand and the disbursement of recovery funds will rekindle domestic spending, while reviving foreign demand will boost exports. A slow vaccine rollout crippling the tourist season, rising public debts and banks’ bad loans cloud the outlook.
Japan: The economy is projected to recover some lost ground this year following 2020’s sharp contraction. The external sector is set to drive the revival, with exports surging on increased foreign demand, while domestically, consumer and capital spending should improve. A resurgence in Covid-19 cases and the reimposition of related restrictions pose risks to the outlook.
United Kingdom: While activity in Q1 will be depressed, momentum should pick up sharply from Q2 onwards, aided by a rapid vaccine rollout, supportive fiscal and monetary stances and the progressive lifting of restrictions. However, the emergence of new Covid-19 variants and disruption as the UK adapts to its new trade agreement with the EU pose downside risks.
United States: This year, GDP should rebound as the impact of the pandemic fades and the labor market recovers. Stronger fiscal stimulus under Biden’s administration and unprecedented monetary stimulus should also support activity. That said, the uncertain evolution of the pandemic and ongoing tense relations with China pose downside risks.
Switzerland: The economy is set to expand strongly this year as external demand recovers and domestic restrictions are gradually eased. However, the uncertain evolution of the virus, a relatively sluggish vaccine rollout and somewhat tense ties with the EU due to disagreements over the renegotiation of the trading relationship pose downside risks.
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