Yesterday, the OECD raised its global growth forecasts for 2021 and 2022 to 5.8% and 4.4% respectively up from its last full economic outlook in December when it estimated global growth at 4.2% in 2021 and 3.7% in 2022. The US is projected to grow at 6.9% this year and 3.6% next year helped by substantial fiscal stimulus and rapid vaccine rollout. The UK economy is also seen as recovering strongly as the economy, particularly the service sector, reopens on the back of its vaccination rollout: it is forecast to grow 7.2% and 5.5% in 2021 and 2022. China is projected to grow at 8.5% in 2021 and 5.8% in 2022. However, the OECD emphasised the unevenness of the recovery and its dependency on a global vaccine rollout with living standards in some regions taking much longer to return to pre-covid levels. For example, the US and Korea are expected to achieve pre-pandemic per capita income levels within 18 months but much of Europe is expected to take nearly 3 years while Mexico and South Africa could take 3-5 years.\
We have spent much time talking about the importance and impact of demographics on the longer term growth outlook. Thus, we found it interesting that on Monday, following a meeting of the Politburo that was chaired by Xi Jinping, China announced it is to move away from its 2 child policy to a 3 child policy for married couples in a move designed to improve its demographic profile. This is part of measures in the 14th Five Year Plan (2021-2025) to address the ageing population. According to the state-run Xinhua News Agency “Implementing the policy and its relevant supporting measures will help improve China's population structure, actively respond to the aging population, and preserve the country's human resource advantages”. The policy reportedly aims to go beyond just raising the number of children allowed by also working to improve areas such as childcare services, access to educational resources, reducing educational expenses, improvements to maternity leave and measures on taxation which are seen as deterrents to having children. According to the 2020 census, China’s fertility rate was 1.3 which is below the replacement rate of 2.1. The 2020 Census registered only 12 million births, an 18% decline from 2019 and the fourth successive year of decline. It also showed that the working age population, those aged between 15 and 59 years, fell to 63.35% down from 70.1% in 2010.