The year 2020 has been one of the toughest years for humanity. It saw global challenges to our ways of life, our governments, and our economies. But 2021 has begun with a ray of hope: The beginning of vaccination drive around the world against COVID-19 is expected to gradually bring life back to some semblance of normalcy, and strengthen economic activity in a backdrop of supportive policy stance by most nations. The optimism is reflected in the projections by the International Monetary Fund (IMF). After a contraction of 3.5% in 2020, IMF expects the global economy to grow 5.5% in 2021 and 4.2% in 2022. The impact of COVID-19 has been severe across nations; however, nations are gradually working to recover.
Here’s a look at the fastest-growing trillion-dollar economies in 2021 based on IMF projections.
1. India
- 2019: 4.2%
- 2020: -8.0%
- 2021: 11.5%
- 2022: 6.8%
With a growth expectation of 11.5% in 2021, India is projected to be the fastest-growing trillion-dollar economy in the world. The decision to impose a complete lockdown in the first half of 2020 to combat the coronavirus pandemic resulted in a near-halt of its economic activities. Its negative impact was evident in two consecutive quarters of negative GDP growth, as a result of which India entered into a technical recession for the first time in its history. Overall, the country witnessed a contraction of 8% during 2020 according to the IMF. However, this is a temporary phase, and India is still a compelling growth story.
The Union Budget presented on February 1, 2021 brought cheer to the markets and promises to focus on growth. Commending the Government of India on its Union Budget 2021-22, USISPF President and CEO Mukesh Aghi said, “The Union Budget 2021-22 has taken into consideration the needs of all sectors of the economy, reflecting a robust growth plan for India to become a $5 trillion economy. Increased government spending in critical areas of the economy, such as agriculture, infrastructure, healthcare, education, and defense, has been much needed.”
The RBI’s Monetary Policy (February) sees India’s real GDP growth at 10.5% in 2021-22. India’s financial markets remain ebullient, along with many other emerging markets as they receive strong portfolio inflows. India is on track for receiving record annual inflows of foreign direct investment.
2. China
- 2019: 6.8%
- 2020: 2.3%
- 2021: 8.1%
- 2022: 5.6%
China was the sole trillion-dollar economy to see positive growth in 2020. Its economy was quick to snap the contraction it experienced during the first quarter of 2020. China, the world’s second-largest economy, is expected to see 8.1% growth in 2021 as economic activity continues to normalize and domestic COVID-19 outbreaks remain under control. It is further expected to grow by 5.6% in 2022. It is estimated that China will likely overtake the U.S. to become the world’s largest economy sooner than earlier anticipated, although in terms of per capita income, China has a lot more catching up to do.
China’s exports are seeing a recovery, jumping 18.1% in December on a year-on-year basis, while its imports increased by 6.5% as per China’s official data. In 2020, China’s industrial enterprises achieved a total profit of 6,451.61 billion yuan, a year-on-year increase of 4.1%. In January 2021, China’s Manufacturing Purchasing Managers Index (PMI) was 51.3%, down by 0.6% points from last month, which was above the threshold for eleven consecutive months, indicating that the manufacturing industry continued to expand, but the pace slowed down. China is among the largest holders of U.S. Treasury securities.
3. Spain
- 2019: 2.0%
- 2020: -11.5%
- 2021: 5.9%
- 2022: 4.7%
After a sharp fall of 11.5% in 2020, Spain is set to rebound with a 5.9% GDP growth in 2021. The country enacted a series of strict lockdown measures to combat the pandemic, which halted economic activity, turning Spain’s economy into one of the worst-hit in Europe. Sectors such as tourism, which accounts for about 12% of Spain’s economy, were hit severely. According to an IMF report, “The pandemic has taken a significant toll on Spain’s people and economy, following five years of strong growth and job creation. A second wave of infections that started in mid-July has put a lid on the recovery.”
Spanish authorities have provided swift income and liquidity support to limit the fallout of the pandemic. Spain mobilized as much as €200 billion (~20% of annual GDP) to protect its companies. In October, President Pedro Sánchez presented “The Recovery, Transformation and Resilience of Spanish Economy Plan.” The plan outlines the roadmap for the modernization of the Spanish economy, the recovery of economic growth and job creation. The plan draws inspiration from the UN 2030 Agenda and the Sustainable Development Goals and is directed to not just rebuilding Spain after the COVID-19 crisis but also preparing for the coming decade. Spain will seek support of €140 billion from the Next Generation EU to carry out these goals, with an amount of €72 billion for the period 2021-2023.
4. France
- 2019: 1.5%
- 2020: -9.0%
- 2021: 5.5%
- 2020: 4.1%
Before COVID-19, France was the world’s most visited country. “Global tourism suffered its worst year on record in 2020, with international arrivals dropping by 74%”, according to the World Tourism Organization (UNWTO). The impact has been visible on the economy of France, which suffered a 9% contraction in GDP. France’s nominal GDP in 2019 was at $2.71 trillion. It contracted to $2.55 trillion according to IMF (October data) and will rise to $2.91 trillion in 2021 before crossing the $3 trillion mark in 2022.
The government of France presented a stimulus plan in September 2020 to support economic activity and job creation. “France Relance” or “Relaunch France” will be implemented as of this year and will extend until 2022. With a budget of €100 billion, “France Relance” has a clear strategic objective: to start building the France of 2030 by transforming the economy, with a focus on three key areas:
- Green transition: Supporting the transition to a greener, more sustainable economy.
- Competitiveness and economic resilience: Creating the most favorable conditions for companies to grow their business and protect jobs.
- Social and territorial cohesion: Ensuring solidarity between generations, regions, and all French citizens.
5. United States
- 2019: 2.2%
- 2020: -3.4%
- 2021: 5.1%
- 2022: 2.5%
The U.S., the largest economy in the world, is fifth with a projected growth of 5.1% in 2021. Real gross domestic product (GDP) increased at an annual rate of 4% in Q4 2020, according to the advance estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased by 33.4%.
According to the Library of Congress research paper, “Until February 2019, China was the largest trade partner of the United States, and currently is in third place after Canada and Mexico while it remains the biggest source of imports.” The swelling trade deficit between China and U.S. has been the cause of tension between the two nations, and the Trump administration has initiated several tariff measures to reduce the trade imbalance. President Biden is not expected to provide concessions to China on this matter.
President Biden has issued an executive order dated January 25, 2021, focused on strengthening domestic manufacturing. It reads, “Today we’re getting to work to rebuild the backbone of America: manufacturing, unions, and the middle class. And the key plank of ensuring the future will be “Made in America.””
The unemployment rate peaked at an unprecedented rate in April 2020 (14.8%), remaining above 10% for three months, before declining to 6.7% in the month of December. According to a recent Quinnipiac University national poll, 61% of people are optimistic about the next four years with Biden as the President, while 68% of Americans support the $1.9 trillion stimulus relief bill.
The Rest of the Top Ten
The economies of Indonesia (4.8%), the United Kingdom (4.5%), Mexico (4.3%), Brazil (3.6%), and Canada (1.9%) complete the top ten fastest-growing economies for 2021. Among the sixteen trillion-dollar economies, five countries—Indonesia, United Kingdom, Canada, Russia, and Italy—have a higher projected growth for 2022 compared to 2021.
https://www.nasdaq.com/articles/the-fastest-growing-trillion-dollar-economies-in-2021-2021-02-05
