Inflation Returns Scenarios

The outlook for the world’s leading urban economies amid the global slowdown (22)

Slow vaccine roll-out: Supply bottlenecks delay exit from restrictions. Withdrawal of social distancing measures is slowed as logistical issues and vaccine hesitancy delay the return to normal.


Limited vaccine effectiveness: New virus variants mean persistent restrictions. Restrictions remain in place for a protracted period as existing vaccines prove less effective against new, more transmissible coronavirus variants.


Return of inflation: Taper tantrum amid expected policy tightening. A deteriorating outlook for inflation is met with a sharp and sustained rise in bond yields.


Rapid upturn: Vaccine roll-out achieves early easing of social distancing. Longer-term economic scars are avoided as the successful roll-out of vaccine programmes and additional fiscal stimulus cement recovery.

Executive Summary


In our February 2021 baseline forecast, subdued global growth in the early part of the year is followed by a marked acceleration in activity from Q2 as restrictions begin to ease. Our baseline forecast sees world GDP expanding by 5.6% in 2021, compared with 4.9% in the previous report.


The first key difference between our scenarios relates to the assumed spread of the virus and associated public health measures. We explore the possibility of only a gradual removal of health restrictions during 2021 (Slow vaccine roll-out) or, more negatively, tighter restrictions that remain in place for a protracted period (Limited vaccine effectiveness). We also examine a more rapid return to normal (Rapid upturn).

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