Top 10 Economic Projections for 2021
The Covid 19 pandemic is slowing in many parts of the world, and more economies are recovering this year. If you plan to invest in the currency or commodity markets, it's important to follow the changes in the markets. In this post, we take a look at the 10 most important forecasts you should know.
1. Chinese Economy Will Grow at a High Pace
China emerged as the world's second-largest economy a few years ago and at this rate is likely to grow even faster than the US economy. The Chinese economy did quite well during the pandemic. For 2021, the government was aiming for economic growth of just over 6%, but economists had predicted 8.6% growth.
In the first half of the year, the Chinese economy grew meteorically, but this growth has slowed down somewhat. This can be attributed to the following:
- The flare ups of covid-19 in different parts of the country
- Flooding in some provinces
- The overvaluation of the Yuan
Nevertheless, economic forecasts indicate that the country will exceed its 6% target by the end of the year. If the current trend continues, the economy is expected to grow by about 8.6% by the end of 2021, slowing to about 5.5% in 2022.
2. Economic Projections on the USD/EUR Currency Pair
The US dollar is the world's most important currency, but it's lost value since the outbreak of the Covid 19 pandemic. Thanks to increased vaccination rates and campaigns, a larger percentage of the population can enter the workforce without fear of the virus.
According to Conference Board, the US economy is expected to grow by 7% (year-on-year) by the end of 2021.
At the start of 2021, the euro was trading at 1.234 against the US dollar. At the end of March, the pair was trading at 1.1703. The euro would strengthen against the dollar until June 2021, after which this trend would temporarily reverse.
Given the different monetary policy positions of the Fed and European Central Bank, the euro is expected to strengthen against the dollar for the rest of the year.
3. Economic Growth of Japan Will Slow Down
The Japanese economy will weaken further towards the end of the year. The average growth rate this year is expected to be 2.6%. One factor that's slowed the economy is the emergence of new Covid 19 variants.
As other economies around the world open up, more investors are selling the JPY as they no longer need it as a safe haven. This will lead to a depreciation of the JPY.
4. Public Debt Levels in G7 Countries Will Exceed $57 Trillion
Public debt in the G7 countries will exceed $57 trillion by the end of 2021. This year, the total increase in public debt will be about $4 trillion, well below the $7 trillion increase in 2020.
While this looks like an unhealthy debt-to-GDP ratio, the economies of the G7 countries are expected to grow faster than the interest on the loans.
5. Economic Projections on the Price of Gold
Gold gained significantly in value in 2020 as investors used it as a hedge in uncertain economic conditions. At the beginning of 2021, the price of gold fell as the pandemic appeared to be coming to an end.
By mid-year, it was clear that new variants would emerge and that it would take longer to eliminate the virus. In combination with the development of the US dollar, this led to the gold price reaching an all-time high of 2073 US dollars.
By the end of the year, the gold price is expected to fall to around 1895 US dollars.
6. Bitcoin Will Move Closer to Its April All-Time High Price
Bitcoin is the best known cryptocurrency, as it was the first to be created. In April 2021, a number of factors drove the price of BTC to over $64,000, the highest BTC price ever recorded.
Economic forecasts point to strong upward momentum, and experts believe the price will get even closer to $64,000. At the moment, interest in BTC has helped the value of the currency reach $50,000, which is still very high.
7. Economic Projections on Ethereum
Ethereum will become an increasingly important cryptocurrency in 2022. The altcoin currently ranks second in the cryptocurrency market and has tried to solve some of BTC's big problems.
For example, ETH 2.0 significantly reduces wasted energy by no longer mining for new coins. Instead, new coins will be generated using the proof-of-stake method.
The transaction speed will also be higher than with BTC. Ethereum is also used for other purposes, such as the creation of smart contracts. The price of ETH is expected to rise to $3156 by early December 2021.
8. Economic Projections on Natural Gas
Natural gas has a multitude of applications in modern life, making it one of the most valuable commodities of all. The four largest consumers of natural gas account for 53% of the world's consumption of this commodity.
Demand for natural gas is expected to increase as economies around the world recover from the pandemic. Analysts predict that the price of natural gas will rise to about $3/MMBtu by the end of the year.
9. Oil Prices Will Drop Further
Oil prices have risen in 2021 and this is because more people are travelling after getting vaccinated against Covid-19. Also, OPEC countries have cut oil production to control the supply of the commodity.
As OPEC increases production, oil prices will average US$72 per barrel in the second half of 2021. By 2022, prices are expected to fall to around 66 US dollars per barrel.
10. Stock Market Returns Will be Lower
In 2020, the Nasdaq rose 43.6% and it's unlikely that similar growth will be achieved this year. In the second half of 2021, the market is likely to offer a return of around 14.3%. It's expected to close at 17,502 points in December.
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