The global GDP is expected to grow by 6.1 percent this year as economies around the world has adapted to the new realities after the Covid-19 pandemic vaccination rollout gathers momentum, according to Global Economic Outlook (GEO) of Fitch Ratings.
Earlier, GEO predicted a growth of 5.3 percent in December last year.
According to the report, published on Wednesday, "GDP outturns were stronger than expected in the fourth quarter of 2020 - particularly in Europe and emerging markets (EM) - and world GDP declined by 3.4 percent in 2020 as a whole, compared to our previous forecast of a 3.7 percent decline."
"World GDP is now expected to be 2.5 percent higher in 2021 than in the pre-pandemic year of 2019," it added.
The Fitch forecasted US GDP growth at 6.2 percent in 2021 (revised up from 4.5 percent), China at 8.4 percent (from 8.0 percent) and the Eurozone at 4.7 percent (unchanged). Growth in EM excluding China is forecast at 6.0 percent (up from 5.0 percent).
The main driver of this global forecast revision is the much larger-than-expected fiscal stimulus package recently passed in the US. The $1.9 trillion price tag represents more than 2.5 percent of global GDP. Fiscal support had a powerful cushioning impact in 2020.
Further fiscal easing has also been announced in the UK, Italy, Japan, Germany and India, while the EU's Next Generation EU recovery fund (NGEU) should provide a sizeable boost to Eurozone growth in 2022.
China is the only major economy that is starting to normalise macroeconomic policy settings, where the fiscal deficit is being scaled back and credit growth is slowing as the economic recovery matures, said the report.
"The pandemic is not over, but it is starting to look like we have entered the final phase of the economic crisis," said Brian Coulton, chief economist of Fitch.
Unemployment forecasts for the major economies have been cut but job market recoveries continue to lag. Leisure and transport industries are labour-intensive and are still afflicted by social distancing.
Vaccine rollout has gained momentum, particularly in the UK and US. The Eurozone has had a slower start but the programme should accelerate in the second quarter of 2021. It is still reasonable to assume that the health crisis will ease by mid-year, allowing social contact to start to recover. But immunisation delays or problems remain the key downside risk to the forecast.
The upwards revision from the previous forecast made last September factors in an expected boost in US consumer spending on the back of progress distributing Covid-19 vaccines and a vast stimulus package, according to a report by the UN Conference on Trade and Development (UNCTAD).
Earlier this month, the OECD also revised higher its growth forecast for this year to 5.6 % from 4.2 %.
However, the 22-page UNCTAD report called 'Out of the frying pan...into the fire?' said Covid-19 will have lasting economic consequences that will require continued government support. It said the main risk to the global outlook is a "misguided return to austerity".
The report estimates that last year there was a 3.9 % drop in output as the spread of the coronavirus sparked lockdowns across the world.