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Global GDP rebounded from recession in Q3, but COVID-19 threats remain

Economies around the world rebounded at a stronger-than-expected pace in the third quarter from the COVID-19 economic crash, and while a series of vaccine breakthroughs bodes well for global GDP, it could still be months, or in some cases years, before vaccines allow a return to normal economic activity.

All 37 nations with nominal GDP greater than $200 billion that had reported real GDP data by Dec. 7 posted economic growth in the three months to September, a dramatic turnaround from the second quarter, data for which showed that 31 of 34 economies were in recession as the coronavirus pandemic disrupted business activity and dealt a significant blow to consumer confidence.

The U.S. posted record annual growth between July and September after the world's largest economy reported its worst GDP contraction in the prior three-month period.

The economic recovery in China, the first country into and out of the crisis, continued in the third quarter, with 2.7% growth. The world's second-largest economy was the only one of the 37 countries tracked in this analysis that posted growth in the second quarter.

Malaysia's GDP expansion was the most pronounced in Asia in the three months to September, at 18.2%, while France topped the European chart, with 18.7% growth.

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Markets cheered a flood of positive vaccine news toward the end of 2020, including the U.K. on Dec. 8 beginning mass inoculation against COVID-19, but the World Bank flagged multiple challenges in vaccinating the entire world, such as potentially reduced take-up rates and transportation capacity issues.

"The take-up rate is a crucial variable to consider in the quest to achieve herd immunity," Damien de Walque, senior economist of the Development Research Group at the World Bank, and Adanna Chukwuma, health specialist at the World Bank, wrote Nov. 19.

They said that 77.7% of people must take a vaccine that has 90% efficacy to achieve the 70% herd immunity threshold, but a survey published in October showed that the percentage of people willing to take a vaccine ranged from nearly 55% in Russia to about 89% in China. A Pew survey published in September suggested that 49% of American adults would refuse a vaccine.

Full-year GDP drop

Despite the economic rebound in the third quarter, the world is on course for a GDP decline this year amid tighter curbs, particularly in Europe. Economic momentum is seen fading in the U.S. in the final quarter of the year as new infections continue to spike and lawmakers in Washington have failed to agree to a fifth coronavirus relief bill needed to support the economy.

However, the global economy is expected to bounce back over the next two years, assuming virus outbreaks are contained and confidence gets a boost from the possibility of a widely available vaccine toward the end of 2021, the Organisation for Economic Co-operation and Development said Dec. 1.

The Paris-based organization said world economic output is expected to reach pre-crisis levels by the end of 2021, powered by a strong recovery in China, which is projected to account for more than one-third of global growth by then.

Uneven recovery

But we are likely in for an uneven economic recovery across regions, with TD Securities expecting the V-shape for Asia, the "swoosh" shape for North America and Dollar Bloc, and the W-shape for Europe.

A V-shape recovery is characterized by a GDP plunge followed by a quick recovery, while the "swoosh" or tick shape suggests a recession followed by a gradual recovery. The W shape implies a double-dip, meaning the economy declines sharply, recovers and then contracts again.

"As we approach year-end, it's clear that early momentum is fading and only in [the second quarter of 2021] and beyond do we expect growth to pick up materially," according to the Dec. 2 TD Securities note.

To download an Excel version of the entire sample, along with first-quarter and second-quarter GDP figures, please click here.