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Global Economy Passes Pre-COVID GDP as Business Investments Pick Up; Risks Remain

After a 3.5% contraction in 2020, global real GDP is projected to increase 6% in 2021, its strongest advance since 1973, but there are still potential risks.

State Of Industry 2

In the second quarter of 2021, the global economy surpassed the pre-pandemic GDP from fourth quarter 2019, according to “PMMI State of the Industry US Packaging Machinery Report” by PMMI Business Intelligence. The Asia-Pacific region completed its recovery in late 2020, while the U.S. likely peaked in May 2021. Africa and Middle East regions are expected to follow suit in the third quarter, with Europe and Latin America completing recovery in the fourth quarter.

The global real GDP is expected to increase 6% in 2021 after a contraction of 3.5% in 2020, the strongest advance since 1973. Growth is expected to continue at a pace of 4.6% in 2022, and then settle at 3% between 2023 and 2025.

The report says that the global economy is moving into the ‘sweet spot’ of the current expansion as vaccination rates increase, pandemic-related restrictions are lifted, and consumer spending surges – particularly in the U.S. due to demand for travel and social interaction-related services. Western Europe is in the early stages of a growth spurt as economies reopen, labor market conditions improve, and household saving rates retreat from exceptionally high levels.

Business investment is also picking up in response to more robust sales prospects and favorable financing conditions, and commodity exporting countries are benefiting from elevated prices and a strong resurgence in exports.

The withdrawal of fiscal stimulus will slow growth as governments rein in spending and contend with higher debt burdens. Government fiscal deficits widened from 3% of world GDP in 2019 to 10% in 2020 and are expected to narrow to 7% in 2021 and 4% in 2022.

Forecast Risks

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