Headwinds are significant, but unlikely to derail the global recovery

The global recovery has lost momentum, and is facing three key headwinds: the spread of the Delta variant, persistent supply chain bottlenecks, and the unwind of government support. But despite the headwinds, economists at ABN Amro expect growth to remain above trend, with a services recovery that still has a long way to go.

The outlook for the global economy remains strong

“We continue to expect above trend growth to continue well into 2022, and after the current soft patch we expect the recovery to regain some momentum next year.”

“While goods consumption is due for a healthy correction, the services recovery has a long way to go before consumption returns to the pre-pandemic trend. The passing of the Delta wave is likely to give the services sector – which makes up the bulk of private consumption – a renewed boost.”

“Growth will be helped by higher government investment, with Biden’s infrastructure spending plans in the US likely to start kicking in, and with the Recovery Fund in the eurozone starting to disburse to member states.”

“While supply bottlenecks have proven more persistent than expected, they are still likely to ease to some extent in 2022, and this should give a new tailwind to the recovery, given the likely significant pent-up investment demand.”

“The normalisation of labour markets should also aid the recovery, and by the end of the year many economies should be back near pre-pandemic levels of employment.”

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