Global | Back to the 70s?

In the past few months the focus of debate on the global outlook has shifted from the economic impact of the pandemic to how value-chain bottlenecks could affect production and inflation.

Key points

• Key points:
• During the crisis of the last decade we went back to our old textbooks to read up on the 1930s Depression. Just a year ago, we looked back at history’s great pandemics. And now we’re looking for parallels with the stagflation of the 1970s.
• The energy price shock is now more complex than in that decade, shaped as it is by geostrategic factors, climate change policy and excess demand built up during the pandemic and further galvanized in the advanced economies by monetary and fiscal stimulus.
• A bias toward production of industrial goods versus services during COVID-19 and the spread of the Delta variant have exacerbated the problems.
• Global forecasts suggest continued overall recovery from the effects of the pandemic, with GDP growth of around 6% this year and 4.5% next.
• The United States and China are growing at a slower rate than previously expected but have already exceeded pre-pandemic levels. Europe will grow by slightly more than 5% in 2021 and by slightly less next year, while its inflation risks are more under control.

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