Key Forecast Trends

• The recovery continues to gather pace. We’ve raised our growth forecasts and expect the global economy to grow by 6.1% this year and 4.3% in 2022. Both forecasts are well above the precrisis trend of around 3.0%.
• It’s important to maintain a sense of perspective. While global output is now back to pre-pandemic levels, it’s still 3% lower than it would have been without the hit from COVID-19. This gap should narrow over the coming year, but we doubt that growth will be strong enough to close it altogether.
• We’ve made significant upward revisions to our 2021 inflation forecasts to reflect the intensity of demand distortions and supply dislocations associated with COVID-19. We expect advanced-economy inflation to reach 2.4% this year (previously 1.7%), before settling back to 1.9% in 2022 as transitory factors start to fade.
• This has become a finely judged call. Should demand growth be stronger, pandemic scarring deeper or supply-chain pressure more persistent than we expect, inflation could easily surprise to the upside. Wage- and price-setting behavior will be key.
• Persistently high inflation would muddy the monetary-policy outlook and cast a long shadow over financial markets. As things stand, though, monetary stimulus is likely to be rolled back only very slowly in coming years.
• That doesn’t mean a uniform monetary approach. Many central banks, including the Fed, will look to gradually return monetary policy to a more “normal” setting once the crisis fades. Others, like the ECB and BoJ, are in it for the long haul.