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We can help ensure cash is working hard for you across your whole business – from seamless coordination of payments to efficient treasury management.
It is reckoned that COVID-19 has had the most profound impact on society and the global economy since World War Two, with the momentous impacts that we are all familiar with. Surging unemployment, permanent output losses and dramatically slowed growth have all taken their toll. Estimates from the Organisation for Economic Co-operation and Development put the damage to the world’s major economies at four times greater than that of the Global Financial Crisis.
Declining growth was temporarily reversed last year. The controlled lifting of restrictions helped to alleviate economic pressures, and a number of economies, including the UK and other European economies registered robust growth with the rebound in activity seen over the course of the summer.
We are all familiar with the narrative from that point. Surges in infection rates triggered more restrictions, causing the global economy to shrink by around 3.3% by the end of last year - the deepest recorded contraction since the Great Depression.
We have seen a co-ordinated international response. Government and central bank support has been crucial, with central banks slashing interest rates to new lows and injecting unprecedented amounts of liquidity into the global financial system. Governments have embarked on an extraordinary fiscal response, such as allowing companies to furlough staff and pledging large sums in the form of loans, grants and credit guarantees. They have also proved willing to ramp up those measures. In fact, policymakers have demonstrated a willingness to gamble that doubling down on a bold fiscal response now will boost the trajectory of the recovery in due course.
While governments have stepped in with innovative fiscal solutions at unprecedented levels, we must recognise that these come at a price. In Global Prospects and Policies, the International Monetary Fund estimates sovereign debt in advanced economies will rise by a staggering 20% to 125% of GDP and more than 10% in emerging economies to 65% of GDP by the end of 2021. Higher taxes and substantial cuts in spending are inevitable, if public finances are to be put back on track.
In the short term, immediate prospects for growth remain closely linked to the lifespan and intensity of the coronavirus.
Happily, the news on vaccines is encouraging. At the time of writing, eight vaccines have been approved globally and vaccination programmes have been rolled out in 153 countries, according to Bloomberg. There are still a number of unknowns in the form of the length of immunity, COVID-19 variants, vaccination hesitancy (which the World Health Organization lists as a major public health threat) and disparities in the efficacy of distribution channels in different parts of the world. Any reduction in the effectiveness of those vaccination programmes would, of course, adversely affect business recovery.
With all these factors in mind, Barclays’ predictions for the rest of 2021 are as follows:
Treasurers will no doubt be keeping a weather eye on macro-economic conditions and the pressures they exert on their organisations in order to mitigate risk and address the continuing challenges within a recovering but certainly challenging global economy.
The 2021 ACT Cash Management Conference, powered by Barclays, was a chance to celebrate what treasurers have achieved over the past year – and to look at future trends in cash management. You can watch all the session replays from the event, plus additional content here.
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We can help ensure cash is working hard for you across your whole business – from seamless coordination of payments to efficient treasury management.
Discover the latest insights and trends from the 2021 ACT Cash Management Conference, powered by Barclays.