Responding to the threat to public health, lockdowns have led to the deepest contraction in global economic activity since the Second World War, with global GDP in the second quarter 10½ per cent lower than six months earlier.
Activity indicators show a rise in global economic activity in the third quarter, supported by strong monetary and fiscal policy actions and some unlocking of restrictions. Despite this, our main-case scenario is for global GDP to fall by 4½ per cent this year.
With the virus still spreading, a strong and sustained global recovery depends on its control. Our main-case scenario does not anticipate global lockdowns of the scale seen earlier this year recurring, so that world GDP increases next year, by 5 per cent. However, the global economic outlook remains highly uncertain.
Even with this rise in output, GDP in advanced economies is forecast to remain below its pre-pandemic level until 2022 or later, with unemployment rising in many economies when pandemic-related employment support measures are lifted. Control of the spread of the virus and its effects remains critical for economic recovery.
Policy interest rates have been reduced to almost zero in many advanced economies and public debt has risen sharply in both cash terms and as a share of GDP. The prospect is for this pattern to remain at least until the threat to public health had receded and economies have returned to sustained growth.