November 9, 2020Macro Outlook 2021: A V(accine)-Shaped Recovery
With the US election largely settled, Goldman Sachs Research has updated its global economic outlook. It is above consensus forecasts for growth in most major economies in 2021. At the most basic level, Goldman Sachs Research views the coronavirus recession as much more V-shaped than previous postwar cycles. Just as the global economy rebounded quickly (albeit partially) from the lockdowns in the spring, the expectation is for the current weakness to give way to much stronger growth when European lockdowns end and a vaccine becomes available. One important assumption underlying the forecast is that governments continue to do a reasonable job replacing private sector income lost in the disruption. In the United States, Goldman Sachs Research expects a $1 trillion stimulus package, potentially enacted before President-elect Joe Biden’s inauguration on January 20. While this is less than half of what might have been seen under a Democratic sweep in the election, it should suffice for a small positive fiscal impulse to US growth in coming quarters.
In a client call that is now available as an Exchanges at Goldman Sachs podcast, Jan Hatzius, chief economist of the firm, described the outlook as “optimistic,” but noted that recent events have tempered expectations. “We’ve shaved our numbers a bit at least for 2021 for effectively one big reason: The COVID resurgence we’ve seen in the US and especially in Europe,” said Hatzius. “There also wasn’t a blue wave—no Democratic sweep of Congress—and that has led to a smaller fiscal stimulus package in our forecasts than what we would’ve adopted in the case of a blue wave.”
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