FKI, 2021 Global Economic Keyword 'Vaccine' (V·A·C·C·I·N·E)

[Asia Economy Reporter Dongwoo Lee] The Federation of Korean Industries (FKI) presented seven characteristics expected to impact the global economy and business activities in 2021 amid the spread of the novel coronavirus infection (COVID-19) under the acronym 'V.A.C.C.I.N.E.'

The term Vaccine is composed of the first letters of the English phrases: 'Vaccine-Shaped Recovery,' 'America is Back,' 'Crazy Debt,' 'China Will Fire,' 'Investment in ESG,' 'New Deal is Everywhere,' and 'Environment is the New Economy.'

On the 11th, the FKI announced that expectations for a 'V-shaped' global economic recovery are growing with the full-scale rollout of COVID-19 vaccinations.

Major economic institutions, including the World Bank, forecast that the global economy will grow by 4-6% this year, supported by vaccine distribution. Among them, the United States is expected to have a growth rate ranging from a minimum of 1.8% to a maximum of 4.8%, depending on the vaccination scenario.

China is also expected to record a growth rate of 7.9%, returning to pre-COVID-19 levels, while the Eurozone is predicted to rebound significantly from last year's record low recession (-7.4%). However, emerging developing countries, excluding China, are expected to have slower vaccine distribution and a growth rate (3.4%) lower than that of the G20 countries (4.7%).

The FKI anticipates that with the inauguration of the Biden administration, the United States will regain leadership in the international trade system and emphasize alliances among free world countries. The return of the U.S. to multilateral systems, including the World Trade Organization (WTO), is expected to strengthen a predictable trade order.

Additionally, the U.S. is likely to focus on restoring relations with allies such as South Korea, Japan, Australia, Mexico, and the European Union (EU), and actively participate in trade agreements, including renegotiations of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). However, the FKI pointed out that the surge in debt due to historically low interest rates could pose a risk to the global economy this year.

Amid the COVID-19 aftermath, global debt reached a historic high of $277 trillion at the end of last year, and public debt in major countries that implemented large-scale stimulus measures is expected to increase significantly. Government debt as a percentage of GDP in advanced economies such as the U.S. is predicted to approach 125.6%, an increase of 20.3 percentage points compared to 2019.

The FKI expects China to accelerate efforts to strengthen its internal capabilities. The 14th Five-Year Economic Plan starting this year is broadly divided into domestic circulation and international circulation. Domestic circulation focuses on building a self-reliant supply chain to reduce dependence on overseas markets and achieving self-sufficiency in essential technologies such as semiconductors. International circulation aims to open China's domestic market to increase foreign-invested companies' dependence on China.

In this process, the FKI foresees intensified surveillance of foreign companies within China, checks and retaliations against U.S. allied countries, and promotion of digital 'One Belt One Road' policies toward developing countries. Furthermore, ESG (Environmental, Social, and Governance) is expected to become the most important indicator for investors this year, with green and digital New Deals becoming the focus of economic policies worldwide.

Moreover, with the launch of the new climate regime (Paris Agreement) and the U.S. rejoining the Paris Agreement, the FKI stated that this year will be a turning point for the transition to a low-carbon economy. The EU will implement a plastic tax starting this year, and the Biden administration in the U.S. is expected to intensify environmental regulations that directly impact corporate activities by linking low-carbon transitions with trade agreements.

This content was produced with the assistance of AI translation services.