Skip to main content

Higher inflation to persist and real rates stay negative

Recent developments have supported our view that the pandemic will not do much permanent damage to the level of GDP in most countries, especially developed markets. Nonetheless, it will accelerate some of the structural trends that were already set to weaken the long-term growth prospects of emerging markets, including China. Accordingly, we expect global GDP growth to ease from the recent trend of around 3.5% to 2.5% by 2050 and we do not see China overtaking the US as the world’s largest economy. Meanwhile, even once the temporary factors pushing up inflation in developed markets wane, we think that it will settle at a higher rate over the next few decades than in the previous one. While real short-term rates will rise in the coming years, we expect them to stay below zero in major DMs throughout this decade at least.

Become a client to read more

This is premium content that requires an active Capital Economics subscription to view.

Already have an account?

You may already have access to this premium content as part of a paid subscription.

Sign in to read the content in full or get details of how you can access it

Register for free

Sign up for a free account to gain:

  • Unlock additional content
  • Register for Capital Economics events
  • Receive email updates and economist-curated newsletters
  • Request a free trial of our services

Get access