The Banking Executive Magazine - March 2021

Global Economic Outlook 2021 The year 2020 has been dictated by the ever-growing spread of the pan- demic. The exponential proliferation of Covid-19 has caused entire economies to cease operations as the number of cases and subsequent deaths keep rising. As policymakers weigh the health costs of the pan- demic to its economic losses, and as they frantically try to decide the ex- tent and intensity of lockdowns, the global economy has endured a dev- astating shock. With the frequent shutting down of businesses, educa- tion centers, and restrictions on travel, confidence levels have plum- meted as consumption and invest- ments have reached new lows. As a result, supply chains, world trade, and the touristic sector were heavily disrupted and the financial, com- modity, and stock markets experi- enced extreme volatility. The efforts exerted in controlling the pandemic and containing it have triggered ex- ceptional demand and crash in oil prices. Considering the speed of which the crisis has dominated the global economy may give us a per- ception on how devastating the re- cession will be, and how difficult it might be to overcome it. According to early estimation, major economies were expected to lose at least 2.4% on average of the value of their GDP. This led economists to de- crease their 2020 forecasts of global economic growth to 2.4 percent, down from around 3.0 percent. In order to understand this estimation better, global GDP was estimated at around 86.6 trillion U.S. dollars in 2019, this translates to a mere drop of. 0.4% in economic growth amounts to almost 3.5 trillion U.S. dollars lost in economic output. Nev- ertheless, these estimations were made before covid-19 erupted, and long before the efforts to contain it were implemented. Ever since then, the global economy has suffered from a dramatic decline due to the outbreak, with the actual growth in global GDP for 2020 now confirmed having been -3.5%. SECTOR PERFORMANCES IN 2020 Services: The Services sector, incor- porating everything from trade, in- vestments, industrial, tourism, and social life, has been one of the worst affected industries in 2020. The rea- son for its demise is that it relies mainly on face-to-face interactions, and its growth is disproportionate to the length and severity of lockdowns, something the vast majority of peo- ple have grown accustomed to in 2020. Nevertheless, not all subsec- tors of the services sector have been equally affected, and unfortunately aid was not distributed proportion- ately. In the US for example, while the accommodation and food serv- ices industry lost 32% of all jobs in 2020, the financial and insurance sector only lost 0.2% of vocations. Yet, the former only got 8.1% percent of aid distributed – equivalent to $7,800 per job loss from February to April 2020- while the latter obtained a total of $8billion in grants equaling $350,000 per job loss. Other ex- tremes were the real estate sector to- taling 91,300$ in funding per job loss and the arts and entertainment sector obtaining $8,000 per job loss. Manufacturing: While the manufac- turing sector also suffered, the sector was relatively better off during 2020 than services. In fact, 94% of all manufacturing plants were opera- tional during peak pandemic times, with 56% of them operating at full- operational capacity and 44% at par- tial capacity. Nevertheless, global Foreign Direct Investment in the manufacturing service sharply de- creased as the pandemic caused in- vestors to become more risk averse. In general, global FDI decreased from a high of $29,823 million for a total of 233 projects in the month of November 2019 to a low of $2,513 million across 49 projects in July 2020. ISSUE 147 MARCH 2021 the BANKING EXECUTIVE 23 Industry Jobs Lost (%) Grants (%) Finance & Insurance Services 0.2 2.3 Real Estate Services 1.1 3.0 Information Services 1.2 1.8 Professional, scientific & technical Services 2.5 12.7 Arts & Entertainment 6.3 1.6 Accommodation & food services 31.8 8.1