Global growth numbers look good, but challenges remain multi-faceted and complex, says Indranil Pan

Asia's Tech News Daily

#Economy, #Expert Columns


Indranil Pan, Chief Economist at YES Bank

The title of this piece broadly reflects the theme for the October 2021 World Economic Outlook (WEO). Compared to the July forecasts, the WEO brought down the global growth projections for 2021 marginally by 0.1 percent to 5.9 percent and has retained the forecasts for 2022 at 4.9 percent.

For the advanced economies, the growth projection for 2021 has been lowered by 40 bps compared to the July forecasts. Of this, the US sees the worst downward revision of 100 bps, while the European region forecast has seen an improvement of 40 bps. Heartening to note, Emerging Markets (EMs) and Developing Economies witnessed an upgrade in the growth projection by 0.1 percent while India’s growth projection remains stable at 9.5 percent.

While the preceding paragraph sets the discussion in motion, this is not the key theme for this article. The downward correction in the headline numbers just by a small margin does not truly convey the economic stress that various countries may be undergoing.

While the projections for some commodity exporters have been upgraded on the back of rising commodity prices, the outlook for low-income developing countries have darkened considerably due to Covid-19.

Thus, the headline growth numbers, to a very large extent, masks the divergence in economic prospects of various countries. However, this is the key risk facing global growth. Under current assumptions, WEO estimates that aggregate output for the advanced economy group is expected to regain its pre-Covid-19 trend in 2022 and even exceed it by 0.9 percent by 2024.

On the other hand, for the EMs and developing economy group (excluding China), it is estimated to be 5.5 percent below the pre-Covid-19 forecast in 2024, thus having significant implications on the standards of living in these economies and the consequent policy responses.

Against the backdrop of the weak growth in a certain segment of the world, the Covid-19 impact on the global supply chain creates another complexity in the policy trade-offs in these economies. Covid-19 has led to longer-than-expected supply disruptions and this is feeding into inflation in many countries.

The WEO highlights that the EMs and developing economies are facing a greater risk of de-anchoring inflation expectations and are more likely to be withdrawing policy support quickly. This is despite a continued large shortfall in the respective outputs, and hence risking recovery out of the Covid-19 situation that is far away from durable.

The other big conclusion of this report is that employment continues to lag the growth recovery. Labour markets are recovering but with the pace being uneven across economies and across various category of workers. This surely has implications for policy. Workers stayed away due to family related issues such as taking care of children during a lockdown. Women are likely to be more affected than men in this case. Faster adoption of automation could be changing labour demand patterns.

Further, employment of youth and lower-skilled workers remain weaker compared to their respective counterparts. WEO estimates that youth participation rates are more than 6 percent lower than in early 2021 in both advanced and emerging market economies.

Such gaps in participation rates, if persistent, can lead to large inequalities amongst the working population and can be a challenge for policymakers. Lower labour participation rates create a pressure on wages and thus on inflation as a second-round reaction and disrupts the pitch for policymakers.

As central banks remain keen to being credible, this situation could lead them to tighten monetary policy ahead of the closure of the negative output gap and prevent a situation where higher wages out of labour supply shortages creates risks for inflation getting self-fulfilling.

Risks to global growth thus remains many. First, the divergence in growth outcomes across the world could be mitigated by a wider spread of vaccination across various countries. Just to provide a sense of the divergence in vaccination, we refer to the This shows that as of October 14, 2021, low-income countries such as Kenya, Ethiopia and Nigeria have less than 2 percent of their population fully vaccinated. On the other hand, a developed nation such as the US has 56 percent of the population fully vaccinated.

As explained earlier, the emerging landscape for growth-inflation mix could nudge the central banks to tighten their policies ahead of expectations. Unfortunately, the fiscal space is also limited in many economies. But governments need to be careful in withdrawing fiscal responses, especially in developing economies, where income inequalities were high before Covid-19 and worsened now. This implies that the governments would still need to spend on supporting lifelines and would also have to continue to spend more on healthcare, education and retraining efforts for long-term sustaining goals.

In conclusion, even as the headline world growth numbers look good, the challenges remain multi-faceted and complex. Effectively, the current situation can potentially lead to missteps from policy makers, a situation that needs to be avoided at all costs.

Disclaimer: The views and investment tips expressed by investment expert on are his own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

Internet Explorer Channel Network
Asia's Tech News Daily
News Related


Moneycontrol Pro Weekender | The Harder They Fall 

Dear Reader, At the time of writing this newsletter, there were around a hundred confirmed cases of the B.1.1.529 variant of the coronavirus in South Africa, but the markets are ... Read more »

Markets tumble on fears of new covid variant, but these smallcaps rally over 10%

Indian equities witnessed a sharp correction for the week ended November 26 with Nifty breaching 17,000 mark as the new covid variant rattled investors. Rising coronavirus cases in the west, ... Read more »

Index price to earnings ratio: Myth and reality

Numbers do not lie, but they can belie their own inferences. A case in point is the P/E (price-to-earnings) ratio, especially the P/E ratio of the index. The ratio of ... Read more »

US stocks tumble on new coronavirus variant fear

US stocks closed lower on Friday, with the Dow and S&P 500 suffering their biggest one-day percentage drops in months, and pandemic-hit sectors that had gained from a reopening falling ... Read more »

2021 is a watershed year for India: Kumar Mangalam Birla

Chairman of the Aditya Birla Group, Kumar Mangalam Birla Friday said that 2021 has been a “watershed year” for the Indian economy after the reforms of 1991. Speaking at the ... Read more »

Indian equity markets witness third biggest fall of the year

The markets witnessed intense selling pressure today from FIIs which the DIIs were not able to match with their purchases. It was a ‘Black Friday’ in its true sense for ... Read more »

Dow futures tank as new COVID variant in South Africa stokes concerns

The Dow Jones Industrial Average fell over 800 points this morning due to concerns about a new COVID variant found in South Africa. REUTERS Concerns over the new COVID-19 variant ... Read more »

Investors lose Rs 14 lakh crore today. Sensex, Nifty fall 8% from record highs

The wealth creation process in the stock market has taken a pause off late and the tides seem to have turned towards market correction over the past month. To be ... Read more »

Indian rupee at 3-week low, yields fall on new COVID variant concerns

Representative image The Indian rupee dropped to its lowest level in three weeks and bond yields fell on Friday as concerns over a new COVID variant spooked markets across the ... Read more »

Govt can consider phased manufacturing plan for AC industry: Anurag Jain

Representative image The government is willing to look at extending a phased manufacturing plan (PMP) for the AC industry to check imports and increase local value addition and employment, a ... Read more »

Lotte's reshuffle indicates less likelihood of Morgan Stanley's exit from Nolboo

A Nolboo restaurant selling “bossam,” boiled pork belly, and “budae jjigae,” sausage stew. Courtesy of Nolboo By Park Jae-hyuk Lotte Group’s appointment of former Nolboo CEO Ahn Se-jin as the ... Read more »

Indian Metals & Ferro Alloys to issue bonus shares in 1:1 ratio

Indian Metals and Ferro Alloys said in a filing on November 26 that its board approved the issue of bonus shares in the ratio of 1:1. The company has fixed ... Read more »

D-Street Buzz: Virus scare unnerves market; realty, auto, metals, financials hit hardest

Stock market,Share Market The Indian stock market went down over 2 percent intraday on November 26 on weak global cues. At 10:57am, the BSE Sensex crashed 1,429.30 points or 2.43 ... Read more »

Indiabulls Housing Finance gains 2%, despite stake dilution by BNP Paribas, Societe Generale

Indiabulls Housing Finance Indiabulls Housing Finance share price added over 2 percent intraday on November 26. The stock has been on the radar after Brickwork Ratings India revised its outlook to ... Read more »

Indices crack, Nifty 50 plunges over 300 points: 4 factors weighing on Indian equities

Indian stock markets gave up Thursday’s gains as the Nifty50 plunged over 300 points to hit a day’s low of 17,217.10 in the face of weak global cues. At 10:12am, it ... Read more »

Indian GDP likely boosted in July-September as lockdowns lifted: Poll

India’s economic recovery likely strengthened in the previous quarter, boosted by services activity that recovered after pandemic-related mobility restrictions were eased, a Reuters poll of economists found. The November 22-25 ... Read more »

Gold Prices Today: Renewed COVID fears likely to drive yellow metal up

Gold Prices Gold was set on November 26 for its worst week in five months, as prices were hammered by increasing bets that the US Federal Reserve would accelerate stimulus ... Read more »

Stocks slip, COVID variant spooks market

Stocks have fallen and look headed for their largest weekly drop in nearly two months, while safe haven assets such as bonds and the yen rallied as a new coronavirus ... Read more »

Buzzing Stocks: ITC, Hindustan Unilever, Tarsons Products and others in news today

ITC, Hindustan Unilever in focus: Prices of select items including soaps and detergents have been hiked by Hindustan Unilever Ltd (HUL) and ITC Ltd – two of the country’s leading ... Read more »

India pitches for Chabahar and INSTC to connect Central Asia with seas

Foreign Minister S Jaishankar on Thursday pitched for consultative, transparent and participatory form of connectivity which “conform to the most basic principle of international law – respect for sovereignty and ... Read more »

Tarsons Products shares debut: Could the listing premium justify the investor interest?

Tarsons Products Tarsons Products shares are expected to gain 25-30 percent when they list on the stock exchanges on November 26 after a stellar response to its initial public offering ... Read more »

Centre urged to defer GST rate hike on apparels

Since its implementation on July 1, 2017, the GST system has faced issues related to assessment and disputes, and what items to bring under the system’s purview. Expressing concern over ... Read more »

Only 29 FDI proposals pending for approval as of today: DPIIT secretary

Foreign direct investment (FDI) proposals are being cleared and as of today only 29 applications are pending, a top government official said. Department for Promotion of Industry and Internal Trade ... Read more »

Development impossible without good roads: Nitin Gadkari

Union Minister Nitin Gadkari (File image: Reuters) Union Minister for Road Transport and Highways Nitin Gadkari on said development is impossible without good roads and that is the reason the ... Read more »

Trade Spotlight | What should investors do with Reliance Industries, Chambal Fertilizers and Torrent Pharma?

The market on November 25 recouped the previous day’s losses to close in the green, driven largely by heavyweight Reliance Industries and technology stocks. The Sensex closed 454.10 points, or ... Read more »

For Bank Nifty, trend is likely to remain in 'sell on rise mode'

Ashish Kyal is Founder of and Ashish Kyal Trading Gurukul Bank Nifty is following an Advanced Elliott wave – Neo wave pattern amazingly well and when this is combined ... Read more »

Moneycontrol PRO presents Intrazon 2.0 on Friday, 26th November, at 8 pm, with Joy Mukherjee on ‘Learn to Pick Momentum Stocks in Intraday Trading'

INTRAZON 2.0 is one of the largest retail Intraday Traders Online Conferences to be organised in India. Some of the best intraday traders in India will share their deep trading ... Read more »

Siemens' FY21 show is decent, though that may not be enough for the stock

Siemens Ltd’s share price fell by around 5 percent on November 25 on the National Stock Exchange (NSE), on a day when the Nifty 50 index inched higher by 0.70 ... Read more »

How to improve female participation in labour force at the grassroots

Representative image The Union and state governments are perhaps facing one of the biggest economic challenge in Independent India’s history in terms recovery from the COVID-19 pandemic. The pandemic has ... Read more »

Private credit can be $89 billion opportunity in next five years: Report

Investors also look to how mainland Chinese markets will react when they will reopen on September 22 after a four-day weekend. (Representative image) Non-bank lenders and credit funds can invest ... Read more »

Govt has identified 101 projects under PM Gati Shakti National Master Plan: Sarbananda Sonowal

Sarbananda Sonowal The Ministry of Ports, Shipping and Waterways has identified 101 projects under the PM Gati Shakti National Master Plan to enhance port connectivity with consumption and production centres, ... Read more »

Vidente considers acquiring controlling stake in Bithumb

The exchange rates and logos of Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Monero (XMR) are seen on the display of a cryptocurrency ATM of the blockchain payment service provider ... Read more »

Finolex Cables share price rise; Geojit sees 14% upside

Finolex Finolex Cables share price was up over 2 percent intraday at Rs 580 on November 25. Research and broking firm Geojit Financial Services has an “accumulate” rating on the stock ... Read more »

What recent tariff hikes mean for Bharti Airtel, Vodafone Idea

After almost two years, the much-needed telecom tariff hikes are here. Bharti Airtel Ltd and Vodafone Idea Ltd have raised by around 20-25 percent tariffs for their prepaid plans. The ... Read more »

Drama-packed session on ASX, with bank spanked, cannabis company chair quitting and bedlinen retailer bulking on furniture

The Australian sharemarket went on another rollercoaster ride before finishing a fraction higher, with investors digesting a significant retail deal and plenty of drama, including a major bank copping a ... Read more »

For inclusive growth

Shinhan Bank CEO Jin Ok-dong, second from left, participates in a ribbon-cutting ceremony at a branch of ‘S with,’ a coffeehouse chain set up by the bank to foster job ... Read more »

Daily Voice | Services to drive India at 7.5% growth rate in Q2, says Sahil Kapoor of DSP Investment

Services are likely to be the growth engine for the Indian economy, thanks to a rebound in post-COVID India, outstripping agriculture and manufacturing. The economy will grow by 7.5 percent ... Read more »

Indian rupee slips 15 paise to 74.55 against US dollar in early trade

Representative image The Indian rupee depreciated by 15 paise to 74.55 against the US dollar in opening trade on Thursday, as a muted trend in domestic equities and a firm ... Read more »

Gold Prices Today: Yellow metal likely to remain weak, short-term investors can create fresh longs on small dips

Gold Prices, Silver Prices Gold prices edged up on November 25 as the dollar eased slightly. But comments from US Federal Reserve policymakers, suggesting the central bank could accelerate stimulus ... Read more »
On you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic