This year’s global economy, corona vaccine, biden, and new climate system will lead

Input 2021.01.03 12:00

Conflict between the US and China, and deepening imbalance between countries, classes and industries are negative

In 2021, the global economy is forecast to expand in the second half of the year thanks to the commercialization of a novel coronavirus (Corona 19) vaccine and the expansion of fiscal spending by the new government of Biden in the United States. However, there is a possibility that the end of the corona pandemic will be delayed, and negative factors such as the US-China conflict and the global economic recovery imbalance will unfold in an unexpected direction.

The Bank of Korea selected seven issues that will determine the global economic direction this year through the Overseas Economic Focus published on the 3rd. ▲Commercialization of corona vaccine ▲Full-scale launch of Bidenomics ▲Strengthening efforts to respond to climate change as an opportunity, ▲Also increasing competition for global supremacy ▲Possibility of intensifying economic imbalance and political conflict in Europe ▲Unbalanced global economic recovery was seen as a crisis. China’s transformation of its growth strategy is also expected to have a significant impact on the global economy.

First of all, the BOK saw the fact that the corona vaccination started in major countries such as the United States as a positive factor. Considering the vaccine supply plan, it is expected that the global economy will revitalize as it is expected to approach a state of’collective immunity’ in the second half of this year. Rejection of vaccination due to concerns about side effects and the possibility of delayed release of some vaccines can be a limiting factor.

The launch of the new US administration by Joe Biden is also expected to be a boon. ‘Bidnomics’ such as large-scale fiscal expenditure, infrastructure investment, tax increase, and easing uncertainties in the global trade environment based on multilateralism are expected to be a positive factor in the overall global economy.

The new climate system, which will be launched from this year, is expected to be an opportunity in the mid to long term. As each government expands investment in eco-friendly technologies, competition for preoccupation in new industries and markets is strengthened, and eco-friendly technology development is promoted, resulting in an economic stimulus effect. In addition, it can contribute to increasing the possibility of sustainable growth of the global economy in the long term by preventing natural disasters.

It is negative that the conflict between the US and China is expected to prolong. After the emergence of the Biden government, the United States shifted its public policy to a method of checks based on principles. The uncertainty in US foreign policy may be somewhat resolved, but the prolonged global hegemony competition between the US and China could have a negative impact on the economy.

The situation in Europe is also expected to act as bad news for the global economy. In Europe, the gap in economic power is widening due to the coronavirus outbreak. There is also room for economic and political conflicts to rise, centering on issues of disagreement among member states, such as the refugee issue or climate change.

The widening gap in economic recovery is happening not only in Europe but also in the world. Depending on the time of supply of the corona vaccine or financial capacity, economic improvement among countries is showing different trends, and even within one country, the differentiation is becoming clear, such as the impact of corona being concentrated in the service industry and low-income groups. The BOK predicted that the expansion of the imbalance between advanced and emerging countries could limit the recovery of the global economy, and at the same time, the corona shock could harden due to the deepening of the imbalance between classes and industries within the country.

It is noteworthy how the’double cycle’ strategy promoted by China from this year to 2025 will also affect the global economy. This is a move for China to shift its economic development paradigm by taking advantage of the huge domestic market away from the existing export-oriented growth. Although there is a possibility that China’s participation in the global supply chain may be reduced due to the effect of the bicyclic policy, its potential as a global consumption market could rather expand.

A BOK official said, “In the mid- to long-term, as opportunities and threats coexist for each issue, the ripple effect on the global economy is expected to differ significantly depending on whether each government responds to policies.”