The global economic recovery from the coronavirus pandemic is expected to pick up steam by the spring of next year, but the pace of growth still appears uneven and may face setbacks and long-term risks posed by the buildup of public debt, Scope Ratings said in its 2021 sovereign outlook report.
The rating agency expects global real GDP to rebound by 5.4% in 2021 following an estimated 4.0% contraction in 2020. Its forecast for next year is 0.6 percentage point lower than the growth figure projected in October.
Scope downgraded its 2021 growth forecast for the U.S. by 1.0 percentage point to 4.0%, and for the eurozone and the U.K. by 0.2 percentage point and 1.4 percentage points, respectively, to 5.6% and 6.6%.
The growth projections for China and Japan were raised by 0.9 percentage point and 0.5 percentage point, respectively, to 9.9% and 3.0%.
"We continue to expect recovery to gain a firmer foothold by early spring 2021 as vaccines are made available to at-risk segments of the population, better weather slows virus transmission and governments ease social and economic restrictions," said Giacomo Barisone, head of sovereign ratings at Scope.
Barisone warned that new waves of COVID-19 infections in countries that hastily ease lockdown measures would create setbacks for the expected full normalization of economic activity next year.
As the global economy enters the recovery phase, the assignment of negative sovereign rating outlooks will continue to moderate in 2021, according to Scope. However, in the long term, the rise in government debt levels as a result of the fiscal response to the pandemic will pose a clear risk to sovereigns, the rating agency added.
"Global government debt is close to a record 100% of GDP, while public debt trajectories are unlikely to reverse significantly post-crisis in the case of many government borrowers," Barisone said. "This represents a constraint on the sovereign rating outlook."
Ten sovereigns rated by Scope have negative outlooks as of Dec. 8, according to the rating agency. These include the U.K., Italy, Spain, China and Japan.