SKBI Big 5 Survey 2021 February

• Main Author: Singapore Management University
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2021
• Subjects: Economic outlook; GDP; inflation; monetary policy; fiscal policy; business cycles; China; Europe; India; Japan; United States; Economics; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/skbi/12; https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1012&context=skbi

The latest survey results suggest that the five largest economies collectively is projected to snapback to almost 6% in 2021, a modest upgrade from the August median, following an unprecedented preliminary contraction of roughly 4% last year (in real GDP terms). The 2022 median growth forecast of slightly above 4.5%, while slower, is still respectable, outstripping its pre-COVID 10-year average pace by more than half a percentage point. The aggregate upgrade in 2021, however, obscures the lopsided nature and highly uneven contour of the ongoing recovery. The bulk of the upward revision to growth was mainly due to IN (to 10% from around 5%), to a lesser extent the US (with upside risks) and more modestly JP. But growth in the EA was lowered to just under 4% (from over 5.5%) with accompanying downside risks. While the 2021 inflation forecasts were a touch higher (slight rise in US & IN but lower in JP), the risk assessments for IN and US (in 2022 as well) were evidently skewed to the upside. Generally, participants view monetary policy at this time, by the end of this year and next to be sufficient and on-hold. But our survey implies that the Fed might liftoff as early as end-2022, sooner than the evolving market guidance of 1Q23 (OIS forwards). The views on fiscal policy seem to be tilted toward more action in 2021 (US, JP and EA), even though most see the current fiscal response as sufficient, followed by the prospect of selective consolidation in 2022. Survey participants continue to expect that COVID-19 is likely to reduce trend growth for three of the Big5 economies (with the exception of CN and too early to assess for US). But the potential drag on future growth from a higher fiscal debt ratio, aside from IN, seems more equivocal.