World Economic Prospects Monthly

Overview: US growth upgrade boosts global outlook▀ We have raised our global economic forecasts again this month and maintain a relatively upbeat outlook about the pace of the economic recovery. We now expect world GDP to grow 6.3% this year and 4.6% in 2022, 0.2pp and 0.4pp higher than we were projecting a month ago. ▀ While recent Covid‐related developments confirm that the pandemic is far from over, the economic data have continued to paint a positive picture. Not only has the hard economic data exceeded consensus expectations, but the April rise in the global services PMI to its highest level since 2007 suggests the recovery is broadening away from industry. ▀ We have made some downward revisions to the near‐term outlook for some key current Covid hotspots such as India and Brazil. However, these downward revisions have been more than offset by increased optimism about mid‐year growth prospects in the rest of the world. ▀ A key driver of the upward revision to our 2022 global GDP forecast and beyond is the inclusion of the $2.7trn American Jobs plan in our baseline forecast. This had led to an upgrade to our US growth forecast to 7.7% this year and 4.5% in 2022. ▀ The latest changes in forecasts mean that booming world growth in 2021 will be followed by another year of strong underlying growth by post‐global financial crisis standards as economies regain ground lost during the pandemic. And there are upside risks to the 2022 from a larger unwind of households' excess savings in the advanced economies. ▀ We have also raised our world CPI inflation forecast slightly in response to the more upbeat growth assessment. Although the risk of overheating varies among economies, we still expect structural factors to ensure that the inevitable near‐term rise in inflation does not morph into a sustained period of strong inflation.