The Office of the Chief Economist has indicated that although the world economy has slowed down in 2020, world economic activity has “rebounded”. Writing in the December 2020 “Resources and Energy Quarterly”, the Office of the Chief Economist indicates that growth forecasts for the near future are strong.
World economy
The REQ notes the IMF’s forecast that world economic activity will be down by about 4.4 per cent by the end of 2020, but that strong growth of 5.2 per cent and then 4.2 per cent is forecast for 2021 and 2022 respectively.
The REQ also notes that global trade is recovering from earlier disruptions posed by falling consumer confidence and that global merchandise export volumes are on the increase in advanced and emerging economies. The Quarterly also notes that by November this year, the global Purchasing Managers’ Index has recorded five consecutive months above the “50” mark, which indicates continued economic expansion whereas for most of the first half of the year it was below 50 and fell to a historically low figure of 39.6 in April.
China’s economy
China is the only major Australian export market with projected growth this year with a likely growth of 1.2 to 1.9 per cent. That’s actually quite a strong result given that the country had a 10 per cent COVID-induced contraction in the first quarter.
China’s economic recovery has been driven by government action including fiscal stimulus, an infrastructure drive, tax relief, increased unemployment benefits, a cut in the bank reserve ratio, an increase in the money supply and an increase in lending to small businesses. Chinese exports have been “resilient” throughout 2020 propped up somewhat unsurprisingly by a strong export demand for medical goods. China’s economy is expected to grow next year by 8.2 per cent and by 5.2 per cent in 2022.
Commenting on the REQ report Rod Nairn, CEO Shipping Australia noted “the current uncertainty in trade relations between China and Australia may take the shine off the projected growth figures given above.”
