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Pandemic-led policy changes or paradigm shifts – what lies in store in 2021?
Each new year brings the hope of a fresh start. After the torrid experiences of the ‘corona year’ 2020, this sentiment was stronger than ever in early 2021 – buoyed up by the launch of vaccines, which could signal a possible way out of the health crisis. So what exactly lies in store for us this year? In the new Quarterly Market Review for Q1 2021, EFG economists outline the key trends they expect to unfold and explain how these could be shaped by the further course of the pandemic.
2021 is expected to bring a synchronised global economic recovery, with inflation and interest rates remaining low: This forecast by EFG economists serves as the starting point for the new Quarterly Market Review. Of course, it comes with the caveat that progress will also largely depend on the success of different nations in getting Covid-19 under control. In a tour d’horizon from the US to Europe and from Asia to Latin America, the experts at EFG provide an insight into what could lie ahead for different markets.
What is the plan to revive US economic growth – and will US-China trade tensions ease under the new Biden Administration? Why are there still grounds for optimism in the UK despite its interrupted economic recovery, Brexit and beleaguered public finances? What are the three main challenges facing the Eurozone? And how is hard-hit Latin America responding to the crisis? The Quarterly Market Review examines all these questions and asks whether the strength – or indeed weakness – of national economic growth is directly linked to the intensity of the Covid‑19 outbreak in each state.
Going beyond these country-focused analyses, the publication also puts the spotlight on two other fundamental effects of the crisis. First, it examines the typical deflationary impacts of pandemics. Taking the UK as an example and citing historical evidence, the publication explains that consumer price inflation tends to fall during health crises – with international data suggesting a broadly similar pattern in other countries. At the same time, EFG economists point out that workers have, in the past, tended to benefit from pandemics due to the resulting labour shortages – potentially driving up real wages.
Second, the publication looks at the way pandemics can trigger paradigm shifts with potentially positive longer-term effects – whether it is by driving innovation, enabling ground-breaking technologies to flourish, or fostering new ways of thinking and working. We need only consider trends such as electrification, green technology and digitalisation – all of which have accelerated due to the Covid-19 outbreak. Together, they are already transforming our lives and will continue to change our world – possibly for the better, once the immediate crisis is overcome.
You can discover fascinating insights into all these topical issues in The Quarterly Market Review