How the pandemic is reshaping the US trade outlook
The fiscal and monetary response to the pandemic will leave a lasting mark on the net trade position of the US. The trade deficit is at record levels and is expected to widen by $248bn in 2021, to 3.7% of GDP in 2021, driven by a flood of imported goods while the economic struggles of our trading partners has led to a dampening of demand for exports.
What you will learn:
- Our baseline sees imports growing 14% in 2021, and cooling to a 4.7% pace in 2022. Exports, meanwhile, will grow a softer 5.1% this year, but the pace of growth is expected to double to 10.1% next year.
- While goods imports and exports are well above pre-virus levels, the recovery in goods exports will lag. Factoring in a slower normalization of services trade, we expect both services imports and exports to heal fully by Q2 2022.
- Despite our expectation that trade will continue to normalize, risks to the outlook include Covid-impaired supply chains, potential consumer caution as the Delta variant surges, and still-elevated tensions between the US and China.
BoK’s monetary policy to tighten even as hiking cycle ends
Even without rate hikes, central banks' monetary policies can effectively tighten if the nominal neutral rate falls below the policy rate. We expect this will be the case for the Bank of Korea this year, as the gap between the policy rate and the nominal neutral rate widens.Find Out More
China: Emerging green shoots in Spring, but not out of the woods
We now incorporate a faster recovery from the post-Covid exit wave and raise our 2023 full-year GDP growth forecast to 4.5% (from 4.2% previously).Find Out More