At the moment there are two prevailing views on capital markets as to how the economy will continue to develop. Pessimists see only stuttering improvement due to the restrictions necessitated by the ongoing pandemic, while those of a cheerful disposition are counting on a rapid revival caused by the introduction of vaccines and fiscal policy support. Although the – in many places still very unhurried – rate of inoculation will not necessarily be sufficient to brighten the economic outlook in the short term, the pace at which central banks and governments are distributing money is breathtakingly fast. The money taps on both this and the other side of the Atlantic have recently been opened once again.
According to the latest analysis from the UN Conference on Trade and Development (UNCTAD), cheap money and billion-dollar economic packages will ensure that the global economy recovers faster than anticipated of late. The experts are predicting an expansion rate of 4.7 per cent for 2021 rather than the previous 4.3 per cent. The Organisation for Economic Cooperation and Development (OECD) is even more optimistic, expecting the pre-corona level to be reached in a matter of months. "Global economic output will rise above its pre-pandemic level in mid-2021," forecasts OECD chief economist Laurence Boone. As for gross domestic product, the experts anticipate growth of 5.6 per cent for 2021, compared with the 4.2 per cent they had projected as recently as December. However, the upturn does not seem to be arriving everywhere at the same time. While construction is rising high and the automotive industry is picking up speed, for example, other sectors such as tourism and aviation have still to get off the ground. This is also evident from share prices, with some delivering V-shaped rallies while others are just stumbling along.
The underperformance could, however, also present an enormous opportunity. That's because the economy is, fundamentally, in the recovery process, and this will ultimately likewise give a tailwind to the sectors that are lagging behind, whether organically or through stimulus packages. It goes without saying that this will not happen overnight, but crisis-hit industries such as aviation, food services and even tourism could get back on their feet little by little. The first indications are already apparent, with online booking platform Booking.com among those offering hope lately. "Over the last few weeks we have started to see some improvements in booking trends," CEO Glenn Fogel revealed when presenting the group's financial results at the end of February. Singing from the same hymn-sheet is the accommodation and intermediary platform Airbnb, which is reckoning on a tangible recovery in the travel industry this year on the back of the progress in coronavirus inoculations.
Aviation could still have a longish flightpath ahead: according to the industry association, the IATA, international airline business suffered a collapse of some 76 per cent in 2020 due to coronavirus. This resulted in a total loss of USDbn 118 for the airlines alone. The relaunch of the sector may take some time yet – there are still many travel restrictions in place due to the virus mutations – but the industry is ready for the fight. More than 16,000 aircraft are being continuously maintained on the ground so that they can resume operations immediately. How quickly this can happen was seen just recently with our neighbours: when the German Robert Koch Institute removed the Balearics from the list of risk areas, many airlines such as Lufthansa, Condor, TUI and Ryanair immediately announced additional flights to the holiday region. The IATA has recently also spread a glimmer of hope, predicting the opening of transatlantic flights in June.
Sources: IMF; OECD
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