Uneven recovery paths as vaccine roll-out gains momentum.
The vaccination race is on and the first countries to reach herd immunity will have a significant economic and social advantage. As of now, the US and UK are much better positioned to reach herd immunity than the Euro area countries. China has already exceeded its pre-COVID-19 GDP level, while we expect the US and the Euro area to return to their pre-crisis output levels by Q4 2021and Q3 2022, respectively.
Vaccine roll-out is key to watch across economies. We continue to believe China will lead the recovery, followed by the US and Euro area economies.
Stimulus will support the recovery. We expect USD 1 trn US fiscal stimulus, contributing to US GDP growth of 5.0% in 2021and 2.8% in 2022.
Inflation risks are rising as oil price base effects kick in this year. Larger US fiscal stimulus adds upside risk.
Risks to the global outlook are balanced with further pandemic setbacks the dominant global near-term risk.