The Q1 Global Economic Conditions Survey (GECS) paints a much brighter picture than its immediate predecessor, with confidence rising by the most in the history of the survey. The approval and deployment of several effective vaccines has dramatically improved the prospects of an end to the COVID crisis. A very large US fiscal stimulus has also boosted global economic prospects this year. The global orders index, which is less volatile than the confidence measure, also increased in the Q1 survey and is consistent with further recovery in the global economy into the second half of 2021.

The two ‘fear’ indices – measured by concern that customers and suppliers may go out of business – gave contrasting messages in the Q1 survey. Fear that customers would go out of business fell significantly while fear that suppliers would do so edged very slightly higher. Both are still at relatively high levels, underscoring the high degree of uncertainty still prevalent in the global economy (Chart 2).

Looking at a regional breakdown, confidence jumped the most in North America where the combined effects of vaccines and fiscal stimulus have transformed the outlook in recent months. South Asia and Asia Pacific also recorded much improved confidence, reflecting better domestic and global demand prospects. Western Europe, Africa and the Middle East all showed more modest increases in confidence, but sentiment in all major regions improved (Chart 3).

With orders – the proxy for real economic activity – the biggest gain in Q1 came in North America. The Middle East also showed recovery in orders, helped by the rise in oil prices. The rise in orders reported in Western Europe was small, reflecting the continued high COVID infection rates and associated restrictions. Africa was the only major region to record a fall in orders, albeit a very small one (Chart 4).

Section 2 of this report provides a detailed global economic outlook, painting a fairly optimistic picture for the rest of 2021. Three factors will heavily influence economic prospects in the coming months. Most significant is the rate of vaccination which varies greatly across countries. Put simply, vaccination can replace lockdown as a means of controlling COVID-19, thereby allowing economic conditions to return to normal. Policy is also very important and a major fiscal stimulus in the US will have positive spill-over effects on many other economies this year. Especially in advanced economies, there is also a large pile of savings accumulated during periods when spending was severely restricted. This can be a source of extra demand when economic conditions improve. On these criteria, the US and UK have better growth prospects than the euro-zone, while China is likely to continue to experience strong growth in any case. Many emerging markets will benefit from increased global demand,but vaccination rates are likely to remain low over the rest of 2021.