Mastercard: 2021 global economic outlook

By Georgia Wilson
Helping governments and businesses to ‘find a path forward’ in the new year, Mastercard Economics Institute has released its Economy 2021 outlook...

Helping governments and businesses to ‘find a path forward’ in the new year following the challenges of 2020, Mastercard Economics Institute has released its Economy 2021 outlook.

“This year put us all to the test. We’ve become more distanced, more digital and more domestically focused. We made a dramatic digital leap forward, and saw incredible resilience from small business owners, consumers and policymakers looking to keep us on track. 2021 will not bring a light-switch return to life before COVID. With a vaccine in sight, we expect a gradual yet uneven recovery that highlights the benefits of embracing digital and low-touch experiences,” commented Bricklin Dwyer, Mastercard’s chief economist. 

  1. ‘E-conomy’ is here to stay

With consumers and businesses turning to online methods to maintain their operations, Mastercard estimates in its report that globally, 20 to 30% of the peak in COVID related shifts to ecommerce will become permanent.

“In the US, this was equivalent to a two-year acceleration in the shift to ecommerce. From contactless payments and pick-up to tele-everything, digital adoption was multi-generational,” commented Mastercard.

  1. Digital retail

With many local restaurants and shops closed, Mastercard reports that 74% of new retail businesses created in the US since April weren’t brick and mortar retailers. “We believe this trend will continue, with more and more businesses opting for virtual storefronts to reach more customers while minimizing costs.”

  1. More time and money spent at home

In 2021 Mastercard expects to see people continue to invest in their homes, with the home furnishings and hardware to benefit around the world. “In many Western countries consumers have shifted living and working away from central business districts, which will have a lasting effect on cities. In the UK, for example, we have seen house prices hit a four-year high outside of London,” noted Mastercard.

  1. Limited travel drives domestic resurgence

For those that are dependent on travel, the pandemic has been particularly disruptive. However with these disruptions persisting, Mastercard has experienced an emerging benefit for markets that tend to have tourism deficits such as China, the UK and Singapore. “For China, 1.7% of GDP is typically spent on tourism in other countries; bringing that travel spending back home stands to lift economic growth substantially,” commented Mastercard.

  1. Uneven recovery

“The pandemic has created a multi-speed global recovery that favors high-income consumers over low and has created a significant job divide for minorities, women and younger workers,” states Mastercard, who reported that 38 countries in the Organisation for Economic Cooperation and Development, employment is down 6.3% for women and 5.2% for men. Overall, 24 countries have a bigger decline in employment for women. 

“Meanwhile, rising prices for housing and stocks have exacerbated income disparities. Government and central-bank stimulus policies that steered economies away from worst-case scenarios are ending, but targeted intervention will likely be necessary to aid those hardest hit,” added Mastercard.

  1. Government debt increase and consumer savings

“The 2020 fiscal stimulus programs dwarfed those from the 2008 financial crisis, with the U.S. Federal Reserve’s balance sheet growing as much in six months as over the prior 12 years,” explained Mastercard in the report, who added that even emerging markets have injected money into their struggling economies. Currently consumers are shifting to saving mode and carrying less debt compared to previous years.

“This year has put us all to the test. We made a dramatic digital leap forward. We have seen incredible resilience from small business owners, consumers and policymakers looking to keep us on course. We have also seen an increase in social unrest around the world, often tied to local unemployment. Risks —from COVID lockdowns to climate change — put social inequities in stark focus. With a vaccine in sight, we will be able to rebuild the connections lost this past year and forge a more resilient future — one that allows for inclusive, sustainable growth that benefits all individuals and businesses alike,” concluded Mastercard.

For more information on business topics in the United States and Canada, please take a look at the latest edition of Business Chief North America.

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