Most chief economists expect economic outlook to improve in 2021 on the back of the vaccine roll-out but warned that new virus variants posed a risk to recovery, a new report shows.
According to the World Economic Forum's Chief Economists Outlook - a report formed from consultation with economists from the private and public sectors - the global economy is also set to benefit from a new US administration committed to tackling short-and long-term challenges, both domestically and globally, through multilateral institutions.
However, new virus mutations and poorly calibrated policy responses could risk derailing growth and lead to new lockdowns, the report showed.
“This report makes clear that precisely calibrated and coordinated fiscal, monetary and competition policy hold the key to global economic recovery and transformation," said Saadia Zahidi, Manging Director at the World Economic Forum.
"As the roll-out of vaccines picks up pace, there won’t be a better time for governments to work together and invest in a fair transition to a greener, more inclusive economy.”
The Covid-19 pandemic has tipped the world economy into the worst recession since the 1930s. Governments and central banks have poured more than $12tn in fiscal and monetary stimulus to stabilise financial markets, support their economies and protect jobs.
The report said that while chief economists were impressed with the speed at which fiscal policy measures were provided, it noted that it was time to transition from emergency spending to more targeted spending to ensure growth.
A majority of those polled also suggested that paying off the significant national debts accumulated in the past year can wait until 2024 or beyond.
Accelerating inequality, remote work and greater tech market dominance are among the pandemic’s emerging trends that are likely here to stay for some years, the report added.
Deglobalisation is a trend that looks least likely to continue, thanks to the countries' efforts to collaborate in order to solve challenges related to vaccine distribution and production.
These trends could shape fiscal and monetary policies over the next few years, WEF said.