My World: June 2021…
This is part of a series of articles where our contributors describe how they think things will look a year from now.
Like most, my working arrangements have changed more in the last six weeks than in the previous few decades. But I recognise that I have been lucky to be able to continue almost as normal. Aside from the lack of variety and the blurring of work and home life, the change has not been difficult.
At present, next year looks a long way away, but certain themes are emerging. At the start of the lockdown, most believed that this would be a short, sharp shock and most aspects of life would revert to what they were in February 2020. But it is clear now that the COVID-downturn will be the deepest on record and that the world economy will bear long-term scars.
We will see some strong growth rates as shutdowns are lifted, but this will only partially reverse the huge falls experienced in the first half of 2020. And the level of GDP will remain below its pre-virus trend for years. This suggests that inflation will remain weak and that monetary support will stay in place for some time, including very low interest rates.
On the fiscal front, government debt burdens will balloon as a result of the various support measures. This is not expected to be a major risk for the developed world. A return to growth should ease the burden provided interest rates stay low as we expect, though funding this will make for some hard choices longer-term.