General

Recently, the World Bank released the June issue of the Global Economic Outlook. The report predicts that global economic growth will reach about 5.6% this year, which is the fastest growth rate in the past 50 years and the fastest post-recession growth rate in the past 80 years.

The global economy will remain strong in 2022; if China is not considered, the growth rate will drop significantly

The global economy is gradually recovering from the recession in 2020. The economic situation of emerging markets and developing economies is improving. Borrowing costs have risen but are still under control, and commodity prices have risen significantly.

Aihan Goss, Director of the World Bank's Forecasting Bureau, predicts that the global economic situation will remain strong in 2022, and the global economic recovery will be strong but uneven. “The three major economies of China, the United States, and Europe have all contributed to the world’s economic growth. Emerging markets and developing economies have risen by about 6%. But if China is not taken into account, the growth rate will decline significantly.”

CCG Director Wang Huiyao said that China is one of the fastest-growing economies in the world and is the first in the world to control the spread of the new crown pneumonia epidemic. The synergy of transportation and consumption has driven the development of China's GDP. The scale of China's digital economy accounts for nearly 40% of GDP, and its contribution to GDP is nearly 70%.

World Bank China, South Korea and Mongolia Bureau Director Rui Ze said that the Chinese economy was hit hard at the beginning of the new crown pneumonia epidemic, but the economy will recover rapidly in 2021 and is expected to grow by 8.5%.

Aihan Goss believes that by the end of 2022, the per capita income of advanced economies will return to normal levels, but only one-third of the people in emerging markets and developing economies will return to normal levels of per capita income, which is in line with the progress of vaccination. closely related.

There is an imbalance in the momentum of recovery, and risks still exist; risks in China are controllable

Wang Huiyao said that during the epidemic, inequality has intensified. The top 1% of people in the world have 30% to 40% of the population's wealth.

Wang Huiyao introduced that at present, the new crown pneumonia epidemic is still raging around the world, but the global vaccine distribution is very uneven. If you want to develop the economy, you must pay attention to the distribution of vaccines. China has provided COVID-19 vaccine assistance to more than 80 countries, and at the same time promised to provide 10 million doses of domestic vaccine to the "New Coronary Pneumonia Vaccine Implementation Plan" to meet the urgent needs of developing countries.

"High debt levels and continuing inflation risks will seriously affect the world financial market. Food security, political crises, climate change, etc. will all have an impact on world economic development. If we can speed up the vaccination schedule to end the new crown epidemic as soon as possible, It will help the world economy to grow in a comprehensive and balanced manner." Aihan Goss said.

High trade costs require attention. The trade cost of emerging markets and developing economies is higher than that of developed economies. Border procedures, transportation infrastructure, logistics costs, trade policies, geographical distance, etc. will all have a significant impact on trade costs.

Aihan Goss said that the issue of high trade costs is worthy of attention because trade is closely related to the income and poverty levels of many countries. Therefore, in order to provide impetus to economic growth in the post-recession era, it is necessary to reduce trade costs.

Ekaterina Vasakmaze, senior economist of the World Bank Group's Outlook Bureau, believes that the world economy still faces three risks.

The first risk is that the epidemic has not been completely eliminated, especially in the face of the seasonal return of the epidemic and the risk of not spreading epidemic prevention.

The second risk is the financial crisis. During the epidemic, some countries maintained relatively relaxed financial conditions, but this cannot last forever, and higher inflation is emerging. However, if inflation expectations are suppressed, the expected financial conditions may tighten sooner in the context of global debt increases, which in turn will endanger economic development. In addition, the financial crisis is also linked to natural disasters. Natural disasters such as typhoons, tsunamis, and earthquakes affect the economic development of island countries.

The third risk is whether to achieve higher growth. The high growth is affected by two determinants. One is the better-than-expected vaccination effect, and the other is the stronger spillover effect brought about by the strong global recovery.

Rize said: "The asynchrony of the global economic recovery, the reality that the epidemic has not been fully controlled, and the ever-increasing tensions in international trade relations may affect China’s domestic investment confidence, and the recurrence of the epidemic in some areas may also be curbed. Consumption is picking up. But, overall, China’s risks are controllable."

Possible changes

The global manufacturing industry is recovering rapidly, and the world has a high demand for certain products made in China (such as medical supplies and electronic products).

Rui Ze believes that after the epidemic, economic growth will gradually shift from being led by public investment and exports to being led by private investment and domestic consumption. What followed was the gradual normalization of fiscal and credit policies. With the increase in demand in foreign markets and the recovery of the domestic market, Chinese companies will soon recover their balance of payments and start investing again, and the country will gradually reduce credit stimulus. The liquidity of funds in industries that rely on public investment will decrease. These industries include infrastructure construction, auto projects invested by local governments, real estate, and so on. Rui Ze believes that investment momentum in other industries in the economy will remain strong, and consumption will account for two-thirds of economic growth.

Aihan Goss said that now that China's economy has gradually returned to its pre-epidemic development trajectory, many pre-epidemic problems will once again become the focus of policy. Among them, the slowdown in productivity growth is one of the important issues China is facing. These problems, including inaccurate credit allocation, limited human flow, and inability to flow quickly and flexibly to the most promising companies, all affect the flow and diffusion of technology and productivity in the economy, thereby limiting productivity growth.

"Global Economic Outlook" is the World Bank's flagship report on global economic development and prospects, with a special focus on emerging markets and developing economies. It is published twice a year in January and June. It is a reference for understanding the trend of the global economy.