## January 2021 WEO Update — An Incomplete Recovery Amid Exceptional Uncertainty

## Source details

**Canonical URL:** [January 2021 WEO Update — An Incomplete Recovery Amid Exceptional Uncertainty](https://www.imf.org/-/media/files/oap/oap-home/2021/weo-update-jan-2021-oap.pdf)

## Other formats

- [Markdown version](/-/media/files/oap/oap-home/2021/weo-update-jan-2021-oap.pdf.md)
- [Structured JSON version](/-/media/files/oap/oap-home/2021/weo-update-jan-2021-oap.pdf.json)

---

### Synopsis
- Title/Authors: International Monetary Fund; January 2021 WEO Update; February 24, 2021; Malhar Nabar, Division Chief, World Economic Studies, Research Department.
- Core assessment: “An Incomplete Recovery Amid Exceptional Uncertainty.”
- Key drivers of uncertainty:
  - Upside: “More vaccine success; additional fiscal support”
  - Downside: “delays in vaccinations, virus mutations, stronger lockdowns, tighter financial conditions”
  - Other risks: “Geopolitical tensions and social unrest could escalate”; “Prolonged decline in activity leads to scarring”

### Risks and Assumptions
- Upside and downside scenarios summarized as:
  - Upside: More vaccine success and additional fiscal support.
  - Downside: delays in vaccinations, virus mutations, stronger lockdowns, tighter financial conditions, geopolitical tensions, social unrest, prolonged scarring.
- WEO baseline assumptions:
  - “Possibility of lockdowns before vaccines become widely available”
  - “Broad vaccine availability in AEs and some EMs in the summer of 2021 and across most countries by the second half of 2022”
  - “Financial conditions to remain at current levels for AEs while gradually improving for EMDEs”
  - “Additional fiscal policy support boosts activity in some countries, but most are expected to experience lower deficits in 2021”
  - “Oil prices are expected to rise in 2021 just over 20 percent from the low base for 2020, but will still remainbelow their average for 2019”

### Economic Outcomes, Activity, and Labor Market Vulnerability
- Activity patterns and indicators:
  - “Real GDP 1/ (index; pre-recession peak = 100)” and depicted recovery paths for several vintages (Jan. 2020; Apr. 2020; Jun. 2020; Oct. 2020; Jan. 2021) summarized as “Incomplete recovery.”
  - “Q3 growth surprise (percent; dotted line indicate 45 degrees)”
  - Purchasing Managers’ Index: “PMI 2/ (index; >50 = expansion) Manufacturing; Services”
- Support and firm/household outcomes:
  - Income support measure: “(share of countries in each income group with higher than 50% replacement income support; percent)”
  - Household saving: “(percent of household disposable income)” with series for “AEs EMs LICs” across quarters 20Q1, 20Q2, 20Q3, 20Q4
  - Bankruptcies: “(index; last pre-recession quarter=100)”
- Labor market vulnerability:
  - “Labor force participation (index; Dec. 2019=100; 15 to 64 Years; sa)”
  - “Total employment (index; Dec. 2019=100)”
  - Latest data point: “November 2020”
  - Country examples shown: USA, CHL, TUR, BRA, CAN and weighted averages (AUS, CAN, JPN, KOR, CZE; AUS, ITA, JPN, KOR, RUS)

### WEO Projections and Revisions (as presented)
- Advanced economies and world: raw lines as presented:
  - “World Advanced Economies U.S. Euro Area Japan U.K. Canada Other Advanced Asia”
  - “2020-3.5-4.9-3.4-7.2-5.1-10.0-5.5-1.5”
  - “Revision from Oct. 2020 0.90.90.91.10.2-0.21.61.4”
  - “20215.54.35.14.23.14.53.63.6”
  - “Revision from Oct. 2020 0.30.42.0-1.00.8-1.4-1.60.3”
  - “20224.23.12.53.62.45.04.12.9”
  - “Revision from Oct. 2020 0.00.2-0.40.50.71.80.70.1”
- Emerging markets and LIDCs: raw lines as presented:
  - “World Emerging Market and Developing Economies China India Brazil Russia Commodity Exporting Economies Low Income Developing Countries”
  - “2020-3.5-2.42.3-8.0-4.5-3.6-4.4-0.8”
  - “Revision from Oct. 2020 0.90.90.42.31.30.50.70.4”
  - “20215.56.38.111.53.63.03.85.1”
  - “Revision from Oct. 2020 0.30.3-0.12.70.80.2-0.10.2”
  - “20224.25.05.66.82.63.94.05.5”
  - “Revision from Oct. 2020 0.0-0.1-0.2-1.20.31.60.40.0”

### Divergent Recoveries and Within-Country Divergence
- Regional and sectoral divergence:
  - “World Real GDP (index; 2019Q4 = 100)” with series for AEs (Jan. 2021 WEO Update), AEs (Jan. 2020 WEO Update), EMDEs excluding China (Jan. 2021 WEO Update), EMDEs excluding China (Jan. 2020 WEO Update), China (Jan. 2021 WEO Update), China (Jan. 2020 WEO Update)
  - “GDP losses relative to Pre-COVID by region 1/ (current projected 2022 level relative to pre-COVID forecast; percent difference)”
  - Sectoral employment exposure chart comparing “Baseline” and “COVID” across sectors including Accommodation&Food Service, Administration, Agriculture, Arts&Entertainment, Construction, Education, Electricity&Gas, Human Health&Social Work, ITC, Manufacturing, Mining, Other Service, Professional&Scientific, RealEstate, Transport&Storage, Water&Waste, Wholesale&Retail
- Distributional and firm-size risks:
  - “Change in unemployment rates across economic groups 1/ (percentage points)” with groups AEs EMDEs; splits by Female/Male, Prime/Youth, High/Low skills and age/gender.
  - “SME Jobs at risk 2/ (percent of private SMEs)” computed using ORBIS for 21 countries facing negative cash or negative equity at the end of 2020; methodology based on Gourinchas et al (2020).

### Policy Recommendations
- Short-term pandemic-containment and support:
  - “Expedite vaccinations. Ensure well resourced health care systems.”
  - “Avoid premature withdrawal of lifelines where local transmission remains high. Gradually shift to support reallocation of resources.”
  - “Fiscal and monetary support should be maintained where debt sustainability and inflation are not at risk”
  - “Foster inclusive, green recovery”
  - “International support for vulnerable economies”
- Effective targeting and sequencing:
  - “Effective and more targeted support”
  - “Avoid premature withdrawal of lifelines where local transmission remains high.”
  - “Roll back gradually lifelines where local transmission has been low, and activity has begun to normalize.”
  - Advanced economies: “Fiscal and monetary policies should continue to be supportive while keeping financial stability risks from materializing.”
  - Emerging and frontier markets: “Fiscal and monetary support should be maintained where debt sustainability is not a concern and inflation risks are contained.”
  - “Address slow productivity growth, rising inequality and higher poverty, and the setback to human capital accumulation.”
- Financial stability and crisis legacies:
  - “Address elevated debt level and associated risks once the pandemic is under control.”
  - “Supplement corporate bankruptcy frameworks by a fast-track process and special out-of-court restructuring frameworks to expedite processing bankruptcies.”
  - “Enhance the regulatory framework to address nonbank financial sector’s vulnerabilities.”
  - “Strengthen prudential supervision to contain excessive risk-taking in a lower for longer environment.”
- International cooperation and support for low-income countries:
  - “Ensure universal vaccination at affordable prices to all countries, including by bolstering funding for the COVAX facility.”
  - “Debt relief, grants and access to concessional financing for low income developing countries to ensure they are not overwhelmed by crisis costs and rising poverty levels.”
  - “A synchronized green public investment push by the economies with fiscal space can generate employment and has welcome cross-border spillovers for trade and climate.”
  - “Intensify efforts to implement climate change mitigation commitments.”

---


_Source: https://www.imf.org/-/media/files/oap/oap-home/2021/weo-update-jan-2021-oap.pdf_