COVID-19 will continue to put a heavy strain on global credit conditions in 2021. Even if a vaccine becomes widely available by midyear, which we assume in our baseline, containment of the pandemic will be very uneven worldwide. Until then, further waves of COVID-19 cases, requiring renewed containment measures, may harm a fragile economic recovery and lead to further credit deterioration, particularly in sectors most exposed to social distancing and travel restrictions.
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A new surge in COVID-19 cases has led to a reimposition of lockdowns in the U.S. and Europe, halting a robust recovery. East Asia has been relatively unscathed. Activity remains uneven. – With momentum fading, we are forecasting a weaker start to 2021, with full year GDP growth at 5.0% (down 30 basis points from previously); our 2022-23 GDP forecast is broadly unchanged.
Credit conditions are broadly favorable (or improving) across the globe—with some regional variation—following positive news about progress in developing a coronavirus vaccine, which augurs well for a faster recovery over the second half of 2021. Still, short-term risks loom, especially as COVID-19 cases surge in many countries as the Northern Hemisphere winter approaches.
