Global Economic Outlook

Inflationary uncertainty and uneven recoveries dominate the world’s economic outlook

2021 has been another turbulent, uncertain year and, at times, it can feel like the planet is facing a constant wave of challenges and threats. For the world’s economists, predicting what lies ahead has never been tougher.

But there remains a place and purpose for forecasting and modeling. As the business world seeks to rebuild from the COVID-19 pandemic and adjusts to a planet more focused than ever on the climate crisis, looking ahead and identifying potential future risks and opportunities is essential.

KPMG’s Global Economic Outlook offers that window into the world ahead. This year, Chief Economists from KPMG firms in a variety of countries, regions and territories have provided detailed insights into those obstacles and opportunities.

COVID-19 did not discriminate. Every nation on the planet was impacted by the pandemic, with seismic consequences for economic output. Government stimulus and support packages were rolled out in various shapes and forms as the world adjusted to a ‘new reality’.

The pandemic may not be over, but the major economies are shifting their mindset and focusing increasingly on a long-term route to sustainable growth.

A major theme in this year’s report is inflationary uncertainty. In almost all of the countries featured in KPMG’s Global Economic Outlook, the risk of high inflation is a central feature. In the UK, political leaders are grappling with potentially crippling supply chain issues that are constraining production. In Brazil, the main driver is a deeply uneven recovery, while in the US, consumer spending is helping to drive recovery, but labor shortages could halt any major progress.

There are exceptions. China was the first country affected by COVID-19, but it appears to be among the first to recover. Industrial production and exports are fueling a big return to pre-pandemic growth, but the global Asian powerhouse isn’t immune to the effects of wider global economic uncertainty. Meanwhile, in the Middle East, the Gulf Cooperation Council countries are reaping the rewards of near record-breaking oil prices, but any sudden change in the energy outlook could grind recovery in the region to a halt.

There is, sadly, no crystal ball in economics. We can’t say for certain what lies ahead, but clear trends are beginning to emerge as the world itself surfaces from the pandemic and focuses on the potential risks and rewards of a more sustainable long-term recovery.

Please get in touch with any of the KPMG professionals quoted within the report for further information on your specific market.

Gary Reader, Global Head of Clients & Markets