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Deutsche Bank said Monday, September 21 that global economic output will return to its pre-pandemic level by mid-2021, after a stronger-than-expected economic recovery in recent months, but higher debt levels and a policy shift could increase the risk of a financial crisis.
“The global economic recovery from the steepest levels of Covid-19 downturn in the past winter and spring has been addressed much faster than we imagined,” Peter Huber, global director of economic research at Deutsche Bank wrote in a note to clients.
“With the third quarter approaching its end, our estimates indicate that the level of global gross product has almost cut the way back to its pre-virus level, and we now expect the path to be completed by the middle of next year, which is two quarter years sooner than our previous expectations.”
Deutsche Bank raised its forecast for global output, expecting it to shrink 3.9% this year after forecasting in May a contraction of 5.9% in 2020. Its forecast for 2021 growth improved to 5.6% from 5.3%.
However, Huber added that there was still much uncertainty and potential trouble.
Fears about the second waves of infections that are increasing in the United States and Europe intensify the doubts surrounding the economic outlook, while the American elections, which are “difficult to predict”, exacerbate the situation.
Meanwhile, Deutsche Bank said, Europe faces the risk of a disorganized UK exit from the European Union.
More trouble could come from a shift in monetary policy, albeit for a few years to come.
