Daniel Defoe in his Journal of the Plague Year points out that: ‘One mischief always introduces another. These terrors and apprehensions of the people led them into a thousand weak, foolish, and wicked things….and this was running about to fortune-tellers, cunning-men, and astrologers to know their fortune’.
So much for forecasting. As far as I can see the only forecasts which we got right in last year’s Top Ten were the results of the Israeli and Taiwanese elections, both of which took place within a few days of our Top Ten being published, and the cancellation of the Hong Kong elections that had been planned for September (though the official reason given for the cancellation was different from that which we had assumed).
Cebr has been widely acknowledged, however, as being one of the earliest accurate predictors of the economic impact of the pandemic. Even before the end of January we warned of the risk of a world recession and by March our forecast for the decline in world GDP was of ‘4% or more’ which is essentially what has happened with an estimated 4.4% decline.
We wrote in September that three things could make 2021 a better year: the discovery of a vaccine, the emergence of a Brexit deal and the voting out of Donald Trump. All three of these have now happened. So will 2021 be a return to normal?
In some ways yes. But in other ways, things will never be the same. Here are our Top Ten for 2021:
1) As vaccinations spread, much of the world will start to return to normal. Indeed pent up demand could create price rises and shortages in many areas, especially in services where supplies might be limited. We expect world GDP to rise by 5.3% in 2021. Growth was last that high (also 5.3%) in 1976.
2) The UK economy had a bigger hit than average from Covid with a fall in GDP in 2020 estimated at 11.4%, though some of the impact reflects the way in which our statisticians measure the public sector. Partly because of the greater measured fall and partly because of the high propensity to consume in the UK, we expect that spending boosted by the £200 billion of savings built up during the pandemic could lead to growth around 8% in 2021. We have tracked UK economic history back to 1930 and the only years recording comparable or higher growth were 1915 (8.0%); 1927 (8.1%); 1940 (10.0%) and 1941(9.1%). Three of these were in the exceptional conditions of wartime, the other registered the recovery from 1926’s General Strike. Growth at this pace will probably prove inflationary, even though it leaves GDP for the year lower than in 2019.
3) 2021 could be the year of travel. Many of those denied holidays in 2020 and missing out on their skiing and winter breaks at the beginning of 2021 will be desperate to travel, while others will want to visit their loved ones. It seems likely that the best destinations, flights and hotels will be booked out by the second half of the year. And prices will rise, partly because costly social distancing precautions are likely to persist and partly because those facing unprecedented demand will be seeking to rebuild profits to offset the losses made over the previous 18 months. Tourism is normally 10% of world GDP so this recovery will provide a welcome boost to the world economy.
4) ‘Eat Out to Help Out’ is unlikely to be repeated. Whereas in August 2020 the Chancellor was keen to encourage a public unwilling to visit restaurants, it now appears that the public is rather more willing to dine out and go to bars than the government is to let them do so. When restrictions end, bars and restaurants are likely to be fully booked.
5) In a normal year there would be few elections in major economies in 2021 other than in Japan and Germany. In Japan the new government of Yoshihide Suga has a commanding lead in the opinion polls. In Germany Mrs Merkel has promised to stand down but the likely successor is as yet unknown. Watch out for the charming and eloquent Norbert Röttgen, chairman of the Bundestag Foreign Affairs Committee and well known on UK TV. He has moved from having a very slim chance to being a serious possibility. There is yet another Israeli election, where the besieged Benjamin Netanyahu might yet reap some of the benefit of the peace agreements with many Arab countries. And there are some elections that have been postponed because of the pandemic – eg in London and other UK municipal elections and in Hong Kong.
6) 2021 will be a year of tech. As restrictions are relaxed, many people will return to their workplaces. but look out for advances in solutions that support working from home. We expect a proportion of the workforce will work from home rather more than they had done pre pandemic and the tech will advance to match the growing demand.
7) Pharmaceutical companies made giant strides in their work to find a coronavirus vaccination in 2020. There was a discontinuity between the time taken to develop the vaccination and the time taken to test and review. No one wants untested vaccines foisted on the public. But regulators should have learned from their 2020 experience and we look forward to increasing pharmaceutical activity. Moreover, at a time when antimicrobial resistance is growing, vaccines may start to replace antibiotics.
8) The cessation of various forms of economic activity reduced pollution and built up the pressure for a greener future. Governments are accelerating the movements away from fossil fuel usage, particularly for cars. Look out for an acceleration of green technologies.
9) Cities had a bad time in 2020 with the communal facilities that make them successful often shut down. Much of the decline in activity will return by the second half of 2021. But there are areas like San Francisco, Los Angeles and Silicon Valley where high taxes and increasingly unpleasant living conditions seem to be encouraging companies to move away. In London, increased transport restrictions have created serious traffic jams which may damage the long term future of the city as builders, delivery people and essential services find it hard to reach their destinations.
10) Most of the sporting events planned for 2020 were postponed so many of the sporting predictions merely need to be repeated. It’s an Olympic Games year, in Tokyo for the first time since 1964. The theme is ‘Requiem and Rebirth’. Expect the Japanese to put more focus on the Paralympics than before. If the wonderful Japanese Rugby World Cup is any indicator, also expect the home team to come flying out of the blocks. The UK may get fewer medals than recently. Watch out for the new events: climbing, surfing, skateboarding, karate and baseball. The major soccer competition is the Euro finals, played in 13 different countries for the first time, but with the semis and the final at Wembley. England are in with a chance, but so are about 10 other teams. If the results go with rankings, Belgium will win. In cricket the world 20-20s are played in Australia. This is traditionally the least predictable tournament but we think the hosts or a newly revitalised India will reassert their dominance. In Rugby Union, the Lions will play in South Africa. My colleagues have different views but Cristian Niculescu-Marcu makes a convincing case for the Springboks. In Rugby League, Fiona Cox says that Wigan are the favourites. And finally the Premier League. The consensus in the office backs Liverpool despite my fingers crossed for Manchester United…..
We wish all our readers a much better year and good luck with their health, at work and in their leisure time. 2020 has shown us how little we can take for granted.