PRIVI SPECIALITY CHEMICALS LIMITED Annual Report 2020-21

39 Annual Report 2020-21 CORPORATE OVERVIEW STATUTORY REPORTS FINANCIAL STATEMENTS MANAGEMENT DISCUSSION AND ANALYSIS Global Economic Outlook As the global economy struggles to recover from the effects of the COVID-19 pandemic, multiple vaccine approvals and the launch of vaccination in some countries in December 2020 have raised hopes of a recovery from the pandemic. Despite the rising human toll of the pandemic, economic activity appears to be adapting to subdued contact-intensive activity with the passage of time. Additional policy measures announced at the end of 2020, notably in the United States and Japan, are expected to provide fiscal support in 2021–22 to the global economy. These developments indicate a stronger impetus for the 2021–22 global outlook than previously envisaged. However, surging infections in late 2020 (including from new variants of the virus), renewed lockdowns, logistical problems with vaccine distribution, and uncertainty about vaccine adoption are important counterpoints to the favorable news. More measures need to be taken on the health and economic policy fronts to limit persistent damage from the severe contraction of 2020 and ensure a sustained recovery. Third quarter GDP results mostly surprised on the upside (Australia, Euro area, India, Japan, Korea, New Zealand, Turkey, United States) or were in line with expectations elsewhere (China, Mexico). Consumer demand rebounded the most. (Source: IMF reports) The sizable fiscal support announced for 2021 in some countries, including most recently in the United States and Japan, together with the unlocking of EU funds, will help spur economic activity among advanced economies with favorable spillovers to trading partners. However, as noted in the January 2021 Fiscal Monitor Update, fiscal deficits in most countries are projected to decline in 2021 as revenues rise and expenditures decline automatically with the recovery. Major central banks are assumed to maintain their current policy rate settings throughout the end of 2022. As a result, financial conditions are expected to remain broadly at current levels for advanced economies while gradually improving for emerging markets and developing economies. Growth expected to strengthen during second half of 2021 After an estimated 3.5% contraction in 2020, the global economy is projected to grow 5.5% in 2021 and 4.2% in 2022 (Source: IMF reports). This reflects the stronger than expected recovery on average across regions in the second half of the year. The 2021 growth forecast is revised up by 0.3%, reflecting additional policy support in a few large economies and expectations of a vaccine-powered strengthening of economic activity later in the year, which outweigh the drag on near-term momentum due to rising infections. The uptick is particularly large for the advanced economy group, reflecting additional fiscal support mostly in the United States and Japan along with expectations of earlier widespread vaccine availability compared to emerging markets and developing economies. Consistent with recovery in global activity, global trade volumes are forecast to grow about 8% in 2021. Services trade is expected to recover more slowly as compared to merchandise volumes. Global activity is expected to remain below pre-COVID levels. The strength of the projected recovery varies across countries. It is dependent on the severity of the health crisis; the extent of domestic disruptions related to the structure of the economy and its reliance on contact-intensive sectors; the exposure to cross-border spillovers; and the effectiveness of policy support to limit persistent damage. Additional vaccine production including those under development in emerging market economies, distribution, and effectiveness of therapies could increase expectations of a faster end to the pandemic than assumed in the baseline, boosting confidence among businesses and households. This is expected to generate stronger consumption, investment and employment recoveries, with businesses expanding capacity in anticipation of rising demand. Indian Economy As India continues to struggle with the pandemic, recent economic data suggests India may have turned toward the road to recovery.