Companies across the globe believe vaccine rollouts will speed the international economic recovery in 2021. New data backs up the optimism: the Organisation for Economic Development (OECD) predicts the global economy will grow by 4.2% in 2021, making up for the same rate of contraction it saw in 2020. While this forecast is good news for companies that operate internationally, firms must understand that the recovery will be uneven across global markets.
Despite inconsistent recovery rates, experts predict strong growth across several Asian countries in 2021. The favorable economic outlooks are driven in part by the recently signed Regional Comprehensive Economic Partnership (RCEP), which unites 15 Asian countries to form the world’s largest trade deal. Also fueling optimism is the Association of Southeast Asian Nations (ASEAN) Comprehensive Recovery Framework, an economic recovery plan designed to accelerate growth in the region.
When measuring 2021 economic growth against pre-pandemic levels, the OECD expects three Asian countries to lead the way: China, Korea, and Indonesia.
China was the only OECD country to see economic gains in 2020, with a 1.8% year-over-year rise in GDP from 2019. Economists predict China’s economy will grow by another 8% in 2021. The rise in GDP will represent a 9.7% increase from Q4 2019—and account for more than one-third of global economic growth in 2021.
Experts are bullish on China for several reasons. The country is adeptly managing the COVID-19 pandemic, giving it an advantage over other countries implementing new lockdowns. By limiting infections, China enables citizens to contribute to the economy, which increased consumer spending at the end of Q4 2020.
Meanwhile, the government is injecting cash into the economy. The People’s Bank of China recently set aside 950 billion yuan (about $145 billion) for medium-term loans in 2021, ensuring banks have enough money to lend businesses and consumers. In doing so, the government keeps the interest rates on loans at a borrower-friendly 2.95%.
China benefits from its role as a leading global manufacturer. As the world economy recovers, countries will increasingly turn to China for the production of goods. The country saw a surge in exports at the end of 2020, especially in medical equipment and electronic devices that enable remote work. Experts expect demand to continue to grow as the international economy rebounds, furthering China’s V-shaped economic recovery.
The OECD predicts Korea’s GDP at the end of 2021 will be 1.6% higher than before the pandemic—the second-highest increase among member countries. Korea’s economy contracted by 1.1% in 2020, a lower rate than any other OECD country outside China.
Global economic forecaster Oxford Economics ranks Korea as the country best suited to navigate the pandemic’s long-term effects. Oxford Economics cites Korea’s stable labor market, relatively strong economic performance in 2020, and overall economic structure as the main reasons the country is well-positioned to weather the effects of COVID-19.
Like China, Korea saw a rise in manufacturing and exports toward the end of 2020. Thanks to increasing demand for tech products, the country’s exports rose by 4% year-over-year in November 2020. The increase in international trade counters a decrease in domestic consumer spending. Financial analysts believe that Korea’s economic recovery will expand to include sectors beyond tech in 2021.
At the same time, the country’s stock market is soaring. The stock market growth speaks to the country’s positive economic forecast, says Choi Joon-chul, head of Seoul-based fund VIP Asset Management. “Foreign investors are rushing to the market, encouraged by the rosy economic outlook.” JP Morgan Chase agrees, predicting the Kospi Composite (Korea’s benchmark stock index) will rise 15% in 2021 after seeing a 90% increase from March 2020 through the end of the year.
Indonesia’s economy was relatively resilient in 2020, contracting by 2.4%— below the world average of 4.2%. The OECD expects Indonesia to bounce back strongly with 4% growth in 2021. The rise represents a 1.5% jump from Q4 of 2019, the third-highest increase of any OECD country.
Oxford Economics attributes Indonesia’s positive economic outlook to stable retail sales and industrial production. Analysts note that gains could be tempered if the government falls behind schedule on vaccine rollouts or if COVID-19 surges lead to new rounds of social distancing mandates.
Despite the uncertainty, Indonesia Finance Minister Sri Mulyani sees reasons for optimism. She cites increasing electricity consumption, positive inflation, and greater spending on goods and social services as evidence that the economy is trending upward.
Others believe that new legislation will spur economic growth. Indonesia recently passed a bill making it easier for both foreign and domestic companies to do business in the country. Indonesian President Joko Widodo says the bill will “create an additional one million jobs a year and increase worker productivity.” Similarly, the Council on Foreign Relations, a nonprofit think tank, believes that the bill will remove complicated bureaucracy that has long inhibited Indonesian economic development.
Capitalize on Expansion Opportunities in Any Market
While experts believe China, Korea, and Indonesia are firmly positioned for economic recovery in 2021, the outlook is not as bright for every international market. The OECD expects major economies like Japan and Brazil to see GDP growth beneath the 4.2% world average predicted for 2021. Companies charting an international growth course in 2021 must understand the market forces shaping growth projections for their target economies. Velocity Global can help.
Our global expansion experts have unparalleled experience helping companies grow into over 185 countries across the world. Our teams know what it takes to succeed in any market—regardless of domestic or world economic conditions. With expertise in everything from drawing up a global growth strategy to hiring, onboarding, and ensuring compliance for foreign employees, we’re with you every step of the way. Reach out today to find out how Velocity Global can help you meet every growth initiative.