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November 02, 2020

Global Economy: A multi-speed world

  • The resurgence in Covid-19 cases has resulted in countries slowing down their reopening or reinstating partial lockdowns
  • Recovery in advanced economies is better than expected, developing economies showed mix results, as per the International Monetary Fund (IMF)
  • The energy index fell in September due to a decline in crude prices; metal prices held up

Succeeding waves of Covid-19 infections are leaving the global economy gasping for air when it resurfaces from the depths seen in April. Economic activity has normalized faster than anticipated, according to the IMF, with support from government investment (China) and transfers supporting household incomes as in the United States (US) and Europe. However, the global economy continues to reel from the pandemic.

 

Reinfections in several regions, particularly Europe, have meant countries have reinstated partial lockdowns or slowed down their opening. Moreover, the recovery has not been uniform, with advanced economies generally doing better than developing economies, where results have been mixed, as per S&P Global (October 2020). A strong rebound, albeit partly mechanical, was seen in the third quarter, but its momentum has slowed in the fourth quarter. Purchasing managers’ indices (PMI) showed firms in the US, euro area (EA) and China expanded output in July and August.

 

However, in September, these indicators point to stronger activity in manufacturing but some slowdown in services, reflecting the increase in infections, stated the IMF.