The Banking Executive Magazine - April 2021

The Global Economy’s Uneven Recovery For now, the rebound in oil prices has buoyed the prospects of major producers like Nigeria, Russia, and Saudi Arabia. By contrast, Brazil’s economy is tottering, reflecting the virus’s unchecked spread – the result of ineffectual political leadership. Turkey faces similar concerns, but it at least managed to eke out positive growth in 2020. Following a marked decline during 2020, the US dollar has firmed up in 2021. In tandem with the upward tick in US bond yields, this bodes ill for many emerging markets and other developing economies, partic- ularly those with heavy foreign-cur- rency-debt exposure. Financial mar- ket pressures could intensify if diver- gent growth patterns (with vulnerable economies registering weaker growth) persist through 2021. The world economy has thus arrived at a pivotal moment. Many countries are grappling with whether to open up their economies despite the con- tinued spread of the virus, and whether to unleash additional macroeconomic stimulus, which could expose them to an unfavorable tradeoff between short-term benefits and longer-term vulnerabilities. Un- certainties are rife, the stakes are high, and indecisive policymaking would hurt consumer and business confidence in the weaker economies, adding to economic strains. The recipe for a strong and durable recovery remains the same: resolute measures to control the virus, cou- pled with balanced monetary and fis- cal stimulus and policies that both support demand and improve pro- ductivity. In economies that are re- covering strongly, it would be premature to ease up in either di- mension; elsewhere, policymakers will need to redouble their efforts in both. the BANKING EXECUTIVE 12 ISSUE 148 APRIL 2021