Major Economies Economic Forecast

Economic Snapshot for G7 Countries

July 27, 2021

Global economic activity is set to rebound in 2021

The global economy will rebound this year on expansive fiscal and monetary stances and the vaccine rollout. However, fastspreading Covid-19 variants will lead to stop-start restrictions in some countries, weighing on activity. Potential vaccine-resistant strains of the virus, supply constraints and U.S.-China tensions pose downside risks.

Global inflation seen increasing on sizable stimulus

Global inflation should increase this year from last—particularly in developed economies—amid sizable stimulus, higher commodity prices, supply bottlenecks and recovering economic activity. However, inflation should decline in some developing economies amid reduced currency pressures and ongoing economic slack.

In July, the ECB adopted a new inflation target of 2%, above the previous target of “below, but close to, 2%”, and suggested it would keep rates lower for longer. Meanwhile, the Bank of Canada trimmed its QE program amid a recovering economy, and the PBOC cut the reserve requirement ratio to ward off downside risks to growth. G7 rates are seen on hold until 2022 at the earliest.



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