Hopes firm for revival in economies

Vaccine rollouts stoke confidence and rising oil prices seen as promising sign

The quickening pace of vaccine rollouts in many parts of the world has raised hopes of a global economic recovery setting in before too long this year.

Tempering the optimism is the emergence of fast-spreading variants of COVID-19 and stubborn fresh waves of infections that have been particularly evident in the northern hemisphere winter.

The world is slowly getting back to more normal patterns, and more and more businesses are resuming activities, according to media reports and forecasters from the private and government sectors.

Oil prices rose on Monday, buoyed by falling inventories and hopes of a swifter global economic recovery, though delays to vaccination schedules in some countries and renewed travel restrictions capped gains, Reuters reported.

Goldman Sachs said prices could rise to $65 a barrel by July, forecasting an oil market deficit of 900,000 barrels per day in the first half of 2021, a higher level than its previous prediction of 500,000 bpd.

A recent Reuters survey found that output by Organization of the Petroleum Exporting Countries rose in January for a seventh month after the group and its allies, including Russia, agreed to ease supply curbs further. However, the growth in production was smaller than expected.

US oil and gas drillers are gearing up for a pickup in demand. As higher prices make new wells profitable again, they added rigs for a sixth month in a row in January, Reuters said.

US production data from the Energy Information Administration showed output rose above 11 million bpd in November, the first time it has exceeded that figure since April.

While global growth is still on course to rebound quickly from the widespread recessions that began last year, it may take longer to ignite and not be as healthy as previously forecast.

For the world economy, the World Bank trimmed its prediction in January to 4 percent expansion in 2021. The International Monetary Fund said in an updated outlook that it is looking to 5.5 percent growth in 2021.

However, high frequency indicators tracked by Bloomberg Economics point to a troubling start to the year, with advanced economies beginning on a weak note and emerging economies diverging.

"That's a reflection of the hard reality that, ahead of widespread distribution of the vaccine, a return to normality is an unlikely prospect," Tom Orlik, chief economist at Bloomberg Economics, said.

Andrew Tilton, chief Asia economist of Goldman Sachs, told CNBC on Monday that China is expected to show "spectacular" GDP numbers in the first quarter of this year.

The world's second-largest economy showed robust GDP growth in the fourth quarter of 2020, expanding at 6.5 percent compared with a year ago. It beat market expectations, and made China one of the few major economies in the world to record positive growth for a year mired by the pandemic.

Double-dip recessions are now expected in Japan, the eurozone and United Kingdom as restrictions to curb the virus's spread are enforced, Bloomberg said.

The International Labour Organization expected that 8.8 percent of global working hours were lost last year due to the coronavirus pandemic, according to Japan's public broadcaster NHK.

The ILO said the slump is equivalent to 255 million full-time jobs. That's roughly four times the number lost in the 2009 financial crisis.

'Biggest shock'

ILO Director-General Guy Ryder told NHK that "we are calling it the biggest shock to global labor markets since the 1930s－since the Great Depression".

These massive losses resulted in an 8.3 percent decline in global labor income (before support measures are included), equivalent to $3.7 trillion or 4.4 percent of global GDP, according to an ILO report released on Jan 25.

Younger workers, who, in Ryder's words, were in a weak situation in the labor market even before COVID-19 broke out, have been hit worst by the pandemic. The employment loss among people aged between 15 and 24 stood at 8.7 percent, compared with 3.7 percent for those aged 25 or older.

He warned that there is an all-too-real risk of a lost generation, adding that "very high proportions of young people simply withdrew from the labor market and became inactive".

Gaps in the distribution of vaccines between rich and developing countries could create an uneven recovery worldwide, Ryder said.

He called for more international cooperation in the field of vaccines and economic policy. "I think it is fundamentally important to act on the understanding that nobody will be out of this crisis until everybody is out of this crisis," he said.

The International Chamber of Commerce in January published a report that estimated rich countries could lose up to $4.5 trillion if they fail to ensure developing nations have access to vaccines.

At the current rates of vaccination, only about 10 percent of the world would be inoculated by the end of the year and 21 percent by the close of 2022, Swiss multinational investment bank UBS said. Just 10 countries are on track to vaccinate more than one-third of their populations this year.