The world economy faces sharply divergent growth prospects across various regions, as prospects of a uniform swift snapback from a dismal 2020 have become clouded. The latest update of the Brookings-Financial Times Tracking Indexes for the Global Economic Recovery (TIGER) reveals grounds for optimism about global growth prospects but also renewed concerns about impediments to a strong recovery. Vaccination euphoria and attendant hopes of a rapid, broad-based recovery have been tempered by a fresh COVID-19 wave sweeping through a number of economies, putting their growth trajectories at risk.
The U.S. and China are shaping up to be the main drivers of global growth in 2021. Household consumption and business investment have surged in both economies, along with measures of private sector confidence. Industrial production has rebounded in most countries, contributing to firming commodity prices and robust international trade. However, the U.S., China, and India are likely to be the only major economies (along with Indonesia and South Korea) that exceed pre-COVID-19 GDP levels by the end of 2021. In most other regions, the scarring effects of the 2020 recession on both GDP and employment are likely to be longer-lasting.
The U.S. economy is poised for a breakout year as massive fiscal stimulus, loose monetary policies, and pent-up demand power rapid GDP growth. Renewed consumer and business confidence have been reflected in generally strong consumption and business investment growth, while financial markets have continued to perform well. Labor market performance has been encouraging, although progress in job growth and unemployment reduction