What's Happening in the World of Personal Finance?
Outlook January 2021
The new decade opened with some challenges and prospects of a way forward and then came COVID19. Energies and substantial resources of governments throughout the world, together with many other agencies, are now directed at containing the pandemic. Developed countries are making generous levels of funding available to provide support for the economy over this period – the UK some £895bn, the EU a recovery fund of 750bn euros and in the USA President Biden is considering a $1.9tn package.
For the UK this has led to Bank interest rate at 0.1% and a self-induced recession to protect life. The sharp bounce-back last year has been followed by a further wave of the virus, more widespread than the first, and has already claimed more than 100,000 lives. It has threatened to overwhelm the NHS.
We expect to hear news from the Chancellor in the coming months of possible measures he may introduce to try and recoup some of the billions being spent propping up the economy. Whilst these are expected to include a range of tax reforms, possibly including capital gains tax and pension tax relief, it is not expected that the implementation phase will begin until the economic recovery is apparent, perhaps in 2022.
The European economy has also been weakened, in a similar way to that of the UK, but with higher unemployment and probably of greater duration.
For the USA, with the election of Joe Biden as President, holding a majority in both Congress and Senate, this will, hopefully, lead to a gradual normalisation of policy and relations with the wider world. First and foremost, he needs to tackle the pandemic, with more than 400,000 lives having been lost already. Dealing with racial inequalities and political polarities runs a close second. Both need solving for the USA to have a peaceful and flourishing economy. Externally, re-joining the world stage, climate change and more diplomatic relations with other major economies, is key.
China is forecast to have had GDP growth of just 2.1% for 2020, rebounding to 8.2% this year. Some of the emerging market countries are experiencing economic contraction, a phenomenon also common to the developed world.
The International Monetary Fund forecast in October that global growth would contract by 4.4% in 2020 and increase by 5.2% in 2021. Clearly this major recession is a global phenomenon as is the virus. Economic activity, essential as it is for our future survival, should not be at the expense of giving proper regard to the health and welfare of every person on the planet.