SKBI Big 5 Survey 2021 August

• 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/11; https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1013&context=skbi

The latest survey results convey an upshift in growth projections of the five largest economies in aggregate accompanied by higher inflation, especially this year and to a lesser extent next year. The aggregate “Big5” median real GDP growth projections for 2021 and 2022 were raised to 6.7% (up in US, CN and EA but down in IN and JP) and 4.9% (all except US), respectively. The overall “Big5” median CPI inflation forecasts were nudged up to 2.6% (higher in US, IN and EA but lower in CN) and 2.4% (in US, IN and EA some), respectively, for this year and next. While monetary policy seems mostly sufficient and on-hold in 2021, survey participants slant toward more easing from the PBoC. In 2022-23, however, the inclination is for the Fed and RBI to embark on firmer policy. On fiscal policy, the current response also appears to be sufficient with increasing likelihood of staying on-hold in the future (but prospectively firmer in 2023 for the US). The combination of upward revisions and downside risk assessments to growth in 2021, at least for some economies, could imply above average uncertainty in the forecasts. Conversely, the higher inflation projections coupled with upside risk assessments in select economies this year bear watching. But the generally balanced risk assessments to growth and inflation in 2022-2023 along with the varied downside risks (as below) imply a more equivocal outlook beyond this year. Participants view the possibility of COVID-19 escalation, unanchored inflation expectations (sustaining upward inflation) and geopolitical surprises as the three main downside risk factors potentially encircling the collective outlook of the “Big5” economies over the next 12-24 months.