Economic and Market Commentary

2021 Global Economic Outlook in Brief

The global economy is likely to rebound strongly in 2021, with potentially the strongest global GDP growth in more than a decade – but there are also three key risks that investors should be aware of.

Discover Opportunities at PIMCO

More from this section

Read Transcript

Text on screen: PIMCO

Text on screen: PIMCO provides services only to qualified institutions and investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized.

Text on screen: Joachim Fels, Global Economic Advisor

Joachim Fels: It's indeed been a long climb out of recession over the last 6 months. We've seen some setbacks for the global economy in recent months, particularly in Europe.

Text on screen: TITLE – Cyclical Outlook BULLET POINTS – Global output and demand likely to rebound strongly in 2021; vaccine rollouts; continued policy support.

But overall, we think the outlook for this year, the growth outlook for this year is really very good. We are looking for the strongest global GDP growth in more than a decade. Two reasons for that. One, and most importantly, the vaccine rollout will allow us to reopen economies in the course of this year, so that bodes very well for growth, particularly in the second half of this year.

And secondly, monetary and fiscal policy is still very supportive. So all of that leads us to expect a very strong rebound in both demand and output in the course of this year.

Image: TITLE – Real GDP Level; a line chart showing years December 2017 to December 2021 on the x-axis and Index (4Q2019 = 100) on the y axis. Four lines represent the U.S. (dark blue), Euro Area (green), U.K. (maroon), and China (light blue).

Now, if we look at the global economy, starting with China, China has really been outperforming the rest of the world on the way up after its recession in the first quarter of last year. You can see this in the chart on this slide, the light blue line shows GDP levels in China on a quarterly basis, so China clearly leading. We're expecting something like 8% GDP growth this year.

Secondly, the US has also done quite well following the second quarter recession of last year, so that's the dark blue line in the chart. We could see close to 7% GDP growth in the US this year. We think that the pre-crisis level of economic activity will probably be reached around the middle of this year. And again, a fiscal package, another fiscal package, a large one from the new Biden administration that is likely to come in the next few months, will help on that.

Europe, as mentioned, is lagging a little bit behind. We're currently seeing a double dip both in the Euro area and in the UK in the fourth quarter and more so in the current quarter given the lockdowns. But even there, we expect a fairly sharp reacceleration of growth stating sometime in the second quarter.

So growth outlook very good. Inflation, there's a lot of talk about inflation risk in the markets. However, we don't see any of it in the data and we do not expect to see any significant inflation pressures this year. We think inflation will remain below target, some near term volatility due to base effects and the recent runup in oil prices, but overall, inflation still very subdued.

So the overall macro outlook is very good for this year. Having said that, we think there are risks out there. There are risks to our optimistic baseline.

Text on screen: TITLE – Three risks to the baseline outlook. BULLET POINTS – Fiscal fatigue; China credit tightening; Economic scarring

And I'll just briefly mention three of them. The first risk is fiscal fatigue which may creep in later this year and more so in 2022. Secondly, China credits tightening, which is something that we are likely to see in the course of this year. And that could have some global ramifications. And then the third risk is the economic scarring that we are likely to get due to the pandemic which is likely to effect, have some longer-term consequences, both for consumer spending, but also for corporate investment.

Text on screen: For more insights and information visit pimco.com.

Text on screen: PIMCO


Disclosure


IMPORTANT NOTICE

Please note that this video contains the opinions of the manager as of the date recorded, and may not have been updated to reflect real time market developments. All opinions are subject to change without notice.

All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and low interest rate environments increase this risk. Reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Sovereign securities are generally backed by the issuing government. Obligations of U.S. government agencies and authorities are supported by varying degrees, but are generally not backed by the full faith of the U.S. government. Portfolios that invest in such securities are not guaranteed and will fluctuate in value. Treasury Inflation-Protected Securities (TIPS) are ILBs issued by the U.S. government. High yield, lower-rated securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Inflation-linked bonds (ILBs) issued by a government are fixed income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Commodities contain heightened risk, including market, political, regulatory and natural conditions, and may not be appropriate for all investors. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Diversification does not ensure against loss.

Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.

This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This is not an offer to any person in any jurisdiction where unlawful or unauthorized. | Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660 is regulated by the United States Securities and Exchange Commission| PIMCO Europe Ltd (Company No. 2604517) is authorised and regulated by the Financial Conduct Authority (12 Endeavour Square, London E20 1JN) in the UK. The services provided by PIMCO Europe Ltd are not available to individual investors, who should not rely on this communication but contact their financial adviser. | PIMCO Europe GmbH (Company No. 192083, Seidlstr. 24-24a, 80335 Munich, Germany), PIMCO Europe GmbH Italian Branch (Company No. 10005170963), PIMCO Europe GmbH Spanish Branch (N.I.F. W2765338E) and PIMCO Europe GmbH Irish Branch  (Company No. 909462) are authorised and regulated by the German Federal Financial Supervisory Authority (BaFin) (Marie- Curie-Str. 24-28, 60439 Frankfurt am Main) in Germany in accordance with Section 32 of the German Banking Act (KWG). The Italian Branch, Irish Branch and Spanish Branch are additionally supervised by the Commissione Nazionale per le Società e la Borsa (CONSOB) in accordance with Article 27 of the Italian Consolidated Financial Act and the Comisión Nacional del Mercado de Valores (CNMV) in accordance with obligations stipulated in articles 168 and  203  to 224, as well as obligations contained in Tile V, Section I of the Law on the Securities Market (LSM) and in articles 111, 114 and 117 of Royal Decree 217/2008, respectively. The services provided by PIMCO Europe GmbH are available only to professional clients as defined in Section 67 para. 2 German Securities Trading Act (WpHG). They are not available to individual investors, who should not rely on this communication. | PIMCO (Schweiz) GmbH (registered in Switzerland, Company No. CH-020.4.038.582-2). The services provided by PIMCO (Schweiz) GmbH are not available to individual investors, who should not rely on this communication but contact their financial adviser. | PIMCO Asia Pte Ltd (Registration No. 199804652K) is regulated by the Monetary Authority of Singapore as a holder of a capital markets services licence and an exempt financial adviser. The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Asia Limited is licensed by the Securities and Futures Commission for Types 1, 4 and 9 regulated activities under the Securities and Futures Ordinance. PIMCO Asia Limited is registered as a cross-border discretionary investment manager with the Financial Supervisory Commission of Korea (Registration No. 08-02-307). The asset management services and investment products are not available to persons where provision of such services and products is unauthorised. | PIMCO Australia Pty Ltd ABN 54 084 280 508, AFSL 246862. This publication has been prepared without taking into account the objectives, financial situation or needs of investors. Before making an investment decision, investors should obtain professional advice and consider whether the information contained herein is appropriate having regard to their objectives, financial situation and needs. | PIMCO Japan Ltd, Financial Instruments Business Registration Number is Director of Kanto Local Finance Bureau (Financial Instruments Firm) No. 382. PIMCO Japan Ltd is a member of Japan Investment Advisers Association and The Investment Trusts Association, Japan. All investments contain risk. There is no guarantee that the principal amount of the investment will be preserved, or that a certain return will be realized; the investment could suffer a loss. All profits and losses incur to the investor. The amounts, maximum amounts and calculation methodologies of each type of fee and expense and their total amounts will vary depending on the investment strategy, the status of investment performance, period of management and outstanding balance of assets and thus such fees and expenses cannot be set forth herein. | PIMCO Taiwan Limited is managed and operated independently. The reference number of business license of the company approved by the competent authority is (109) Jin Guan Tou Gu Xin Zi No. 027. 40F., No.68, Sec. 5, Zhongxiao E. Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.). Tel: +886 2 8729-5500. | PIMCO Canada Corp. (199 Bay Street, Suite 2050, Commerce Court Station, P.O. Box 363, Toronto, ON, M5L 1G2) services and products may only be available in certain provinces or territories of Canada and only through dealers authorized for that purpose. | PIMCO Latin America Av. Brigadeiro Faria Lima 3477, Torre A, 5° andar São Paulo, Brazil 04538-133. | No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2021, PIMCO.

CMR2021-0201-1504091

Filters: Reset All

Filters

Close Filters Dropdown
  • Tags

    Reset

    Close
  • Category

    Reset

    Bond by Bond
    Careers
    Economic and Market Commentary
    Investment Strategies
    PIMCO Foundation
    PIMCO Education
    View from the Investment Committee
    Viewpoints
    Education
    Close
  • Order By

    Reset

    Alphabetical
    Most Recent
    Close
() filters applied

Multimedia Finder

Filter By:
  • Careers
  • Economic and Market Commentary
  • Investment Strategies
  • PIMCO Education
  • View from the Investment Committee
  • Viewpoints
  • Understanding Investing
  • A
  • B
  • C
  • D
  • F
  • G
  • H
  • I
  • K
  • L
  • M
  • N
  • O
  • P
  • Q
  • R
  • S
  • T
  • W
Clear
Tina Adatia
Fixed Income Strategist
Joshua Anderson
Head of Global ABS Portfolio Management
Del Anderson
Credit Analyst
Andrew Balls
CIO Global Fixed Income
Justin Blesy
Asset Allocation Strategist
Meredith Block
ESG Research Analyst
David L. Braun
Head of US Financial Institutions Portfolio Management
Nathaniel Brown
Director of the PIMCO Foundation
Erin Browne
Portfolio Manager, Multi-Asset Strategies
Grover Burthey
Portfolio Manager, ESG
Libby Cantrill
Executive Office, Public Policy
Josh Davis
Global Head of Client Analytics
Pramol Dhawan
Head of Emerging Markets Portfolio Management
Joachim Fels
Global Economic Advisor
David Fisher
Co-Head of Strategic Accounts
Nick Granger
Portfolio Manager, Quantitative Analytics
Gregory Hall
Head of U.S. Global Wealth Management
Mary Hoppe
Daniel H. Hyman
Head of Agency MBS Portfolio Management
Daniel J. Ivascyn
Group Chief Investment Officer
Mark R. Kiesel
CIO Global Credit
Kaboo Leung
Christine Long
Head of Retirement Marketing
Samuel Mary
ESG Research Analyst
Scott A. Mather
CIO U.S. Core Strategies
John Murray
Portfolio Manager, Commercial Real Estate
John Nersesian
Head of Advisor Education
Roger Nieves
Senior Advisor
Jason Odom
Strategist, Asset Allocation
Sonali Pier
Portfolio Manager, Multi-Sector Credit
William Quinones
Product Strategist
Lupin Rahman
Head of EM Sovereign Credit
Libby Rodney
Steve A. Rodosky
Portfolio Manager, Real Return and Long Duration
Emmanuel Roman
Chief Executive Officer
Steve Sapra
Client Solutions & Analytics
Jerome M. Schneider
Head of Short-Term Portfolio Management
Marc P. Seidner
CIO Non-traditional Strategies
Greg E. Sharenow
Portfolio Manager, Real Assets
Anmol Sinha
Fixed Income Strategist
Candice Stack
Head of Client Management, Americas
Kimberley Stafford
Global Head of Product Strategy
Cathy Stahl
Global Head of Marketing
Geraldine Sundstrom
Portfolio Manager, Asset Allocation
Eve Tournier
Head of European Credit Portfolio Management
Francois Trausch
CEO and CIO, Allianz Real Estate
Jerry Tsai
Quantitative Research Analyst
Megan Walters
Global Head of Research, Allianz Real Estate
Qi Wang
Portfolio Manager, Global Macro Hedge Fund Strategies
Jamie Weinstein
Portfolio Manager, Head of Corporate Special Situations
Tiffany Wilding
North American Economist
Ben S. Bernanke
Chair, Global Advisory Board
  • Alphabetical
  • Most Recent
Section : Date : Experts :
Reset All
Unlocking Alternatives: Marco Opportunities in Mid-Cycle Markets
Viewpoints

Unlocking Alternatives: Macro Opportunities in Mid-Cycle Markets(video)

Unlocking Alternatives: Macro Opportunities in Mid-Cycle Markets

In the mid-cycle environment, we are taking advantage of the relatively low volatility to build positions that provide exposure to higher interest rates. Learn more about where Qi Wang, portfolio manager, global macro hedge fund strategies, sees opportunities in today’s markets.

MORE ON ALTERNATIVES AT PIMCO

Resiliency Through Flexibility
Fixed Income Portfolio Construction
New Opportunities from PIMCO and Allianz Real Estate
Unlocking Alternatives: The Office Market in a Post-COVID World
Delivering Alpha: The Value of Professional Advice