Global economy to rebound in 2021, outpace most historic market recoveries, says John Greenwood of Invesco

  • Invesco Chief Economist asserts that global economy will be boosted by huge monetary and fiscal stimulus policies across developed world.
  • Recovery in developed economies will be much more rapid than previous recessions including Global Financial Crisis. 
  • Asian countries on steady but unspectacular recovery path, aided by modest interest rate reductions and reserve requirement cuts, but demand for exports less than in past export-led recoveries. 

Hong Kong, 13 January 2021: The global economy in 2020 has been driven primarily by developments in the COVID-19 pandemic. Looking to 2021, Dr. John Greenwood, Chief Economist of Invesco forecasts that developed countries will experience a significant rebound once populations broadly perceive that conditions have stabilized and day-to-day economic life is returning to normal.  This contrasts notably with the aftermath of the Global Financial Crisis in 2008 when recovery was sub-par and anemic for a long period across the developed world.

The roll-out of the COVID-19 vaccine commenced in several Western countries in December 2020. Dr. Greenwood expects that deployment of adequate supplies of vaccines is likely to last through most of the first half of 2021, thus the perceived return to normal economic life should become more widespread throughout developed economies in the second half of the year.

Dr. Greenwood further stresses that broad money and credit growth has been strong in large economies, encouraged by record-breaking monetary and fiscal stimulus policies adopted by central banks and governments across the developed world. Once consumers and services businesses regain confidence in line with the success of vaccine deployment, households and businesses should start to spend the excess savings accumulated in 2020. “This means that consumption, investment and employment are all likely to recover at a much more rapid pace than after a typical recession, generating a surprisingly strong bounce-back,” said Dr. Greenwood.

Asia: steady growth amid a slowdown in exports

For East Asia, Dr. Greenwood sees that most economies are on a steady but unspectacular recovery path, aided by modest interest rate reductions and reserve requirement cuts. While some Asian governments such as South Korea have found it necessary to engage in extraordinary measures such as quantitative easing, China has notably deployed relatively little economic stimulus, maintaining its long-term plan to de-leverage the economy.

Examining China further, Dr. Greenwood notes that the country’s economic growth has started to return to trend of around 5-6% per annum, however money and credit growth, led by commercial bank lending, has increased only slightly in 2020 from around 8.5% per annum to 10.5% in September 2020. As such, Dr. Greenwood expects China will not experience a cyclical credit-driven boom akin to 2016-17 but will rather continue to slowly return to trend growth most likely in the second half of 2021.

Although Asian governments have generally been more successful in suppressing the coronavirus, Dr. Greenwood predicts the region will likely face lower demand for its exports in 2021 than in a typical export-led recovery, limiting the upside of the region’s economic upswing. Economies like China and Japan should see strong domestic demand growth, but exports, their traditional area of strength, will be slower to recover.

Dr. Greenwood summarized: “The 2021 outlook for emerging market economies is relatively optimistic, based on a weaker US dollar and progress being made towards a COVID-19 vaccine.”

United States: economy to follow after the buoyed asset prices

The scale of the combined monetary and fiscal support from the US Federal Reserve (“Fed”) and federal government is tremendous, having triggered an increase in broad money supply in 2020. The amount of money held by the public (“M2”) increased by an astonishing annualized rate of 33.2% between March and September, and 24.1% on a year-on-year basis at the end of September.

The total federal fiscal stimulus for the economy – in immediate support measures, tax deferrals and other liquidity or guarantees – since the start of the crisis amounts to US$3.061 trillion, or 14.3% of 2019 GDP. On the monetary side, the Fed’s forward guidance implies that the Fed funds rate will stay at the current 0.1% at least until 2023. Dr. Greenwood argues that the injection of money during the months of March-July was so large that, even if the Fed does nothing more, there will be ample spending power available in the economy until at least mid-2021.

“US monetary and fiscal policies have had a phenomenal impact on asset prices,” Dr. Greenwood commented. “The same forces that drive asset prices also feed through to spending on goods and services.  As and when US health authorities start to succeed in overcoming the virus, the lagged impact on spending of the large injections of money and credit could be enormous.”

Dr. Greenwood foresees 4% growth in US real GDP in 2021, while inflation will likely remain subdued at 2.2% in 2021 on account of earlier falls in oil prices and the ongoing setbacks to spending on services. Prices could start to rise in 2022.

Eurozone & UK: massive support from monetary stimulus; Brexit uncertainty to abate

Uncertainty related to the evolution of the pandemic continues to dampen the recovery in the labor market and in consumption and investment in Europe. Dr. Greenwood finds that the Eurozone economy should continue to be supported by favorable monetary conditions, in terms of M3 growth, and a pro-growth stance by the European Central Bank and regulatory authorities. These forces will continue to outweigh any fiscal proposals or EU-level bond issuance program.

The UK and EU reached a historic Brexit trade deal before the end-of-2020 deadline. Dr. Greenwood highlighted that the agreement provides for free trade on most goods traded between the UK and the EU, although there will be a need for prior electronic clearance of goods, full documentation, and occasional spot checks on both exports and imports. While services are not covered by the agreement, he pointed out that the real benefits for the UK will come in future years from lower import costs outside of European countries. “The regime uncertainty that has held back capital investment and slowed GDP growth in the UK over the past three years should now start to dissipate,” Dr Greenwood concluded.

Appendix - Consensus Forecast Growth in GDP and CPI in Selected Major Economies

Consensus Economics

2020 Expected

2021 Invesco Forecast*

(Invesco Forecast*)


Real GDP

CPI Inflation

Real GDP

CPI Inflation




3.8% (4.0%)

2.0% (2.2%)




4.7% (4.5%)

0.9% (1.0%)




4.7% (6.0%)

1.5% (1.2%)




2.5% (2.5%)

0.0% (0.2%)




4.8% (5.0%)

1.6% (2.0%)




7.9% (7.5%)

1.9% (2.0%)




10.2% (10.8%)

4.4 % (3.5%)

Source: Consensus Economics, Survey Date: 16 November 2020, and Invesco as of 30 November 2020

* Forecasts are not reliable indicators of future performance.

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