Economic Update
Macroeconomic Outlook
Covid-19 remains a major challenge for the global economy, particularly for emerging markets. However, vaccination campaigns are progressing across North America and Europe supporting the economic recovery in the second half of 2021, with growth anticipated to remain vigorous throughout 2022. We continue to witness buoyant global trade conditions. Strong fiscal stimulus and loose monetary policy provide support to growth, but may also drive inflation expectations higher in the short term, alongside demand supply imbalances, leading to a further widening in government bond yields. With monetary policy anticipated to remain loose, and a meaningful uptrend to inflation unlikely, we anticipate government bond yields to increase, but to remain below the long-term historical average in the medium term.
Economy and Infrastructure
Covid-19 pushed the global economy into a deep recession in 2020. Infrastructure demand proved relatively resilient, particularly if compared with the severity of the downturn. However, the impact of the pandemic varied substantially across sectors with some, such as passenger transportation, affected materially by lockdown measures, freight proving resilient and digital infrastructure and renewables accelerating. In the second half of 2021, we anticipate a gradual recovery in sectors still impacted by the pandemic, supported by a return to economic growth.
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