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In the latest World Economic Outlook, this year's global GDP growth estimate was revised up to 6.0 per cent, which would make 2021 the best year in almost half a century. For advanced economies, the corresponding figure was 5.1 per cent – up from 3.9 per cent in the October outlook.

What's more, last year's contraction was again estimated to have been a lot less horrific than originally envisioned. Nine months ago, advanced economies were estimated to contract by a full 8.0 per cent in 2020. The IMF now puts the decline at 4.7 per cent.

In other words, output in advanced economies will climb above its 2019 level one year sooner than expected (or feared, if you will).

These revisions hold two important lessons. First, the economic policy toolbox was not exhausted – and the tools do work. Given the scale of US fiscal countermeasures in particular, they should. With a budget deficit to the tune of 15-16 per cent of GDP, US fiscal policy actually has an expansionary impact on a global scale.

Lesson number two: You really shouldn't be surprised. Financial markets saw this happening long ago. The MSCI World Index is up almost 20 per cent in six months (roughly since IMF published its October outlook) and a full 73,5 per cent since the nadir in March last year. And spreads on, say, US high-yield bonds have fallen by some 7,5 percentage points, which is, arguably, even more striking.

Of course, markets overreacted in the first place. But so did IMF and other highly qualified centres of economics competence – only somewhat later. And that, I venture, is the classic sequence of events. It's a fairly well established fact that contemporaneous changes in GDP growth hold little or no predictive value for financial returns. Some might even find it trite.

And some still don't. That's probably the real surprise here.



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