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Digital, distanced and domestically focused: Mastercard’s view on 2021

To help governments and businesses of all sizes find a path forward following the challenges of 2020, the Mastercard Economics Institute has released Economy 2021, an outlook of what’s to come in economies around the world. 

The team of data scientists and economists assessed key economic indicators, paired with an analysis of anonymised and aggregated sales activity across the global Mastercard network, to deliver global and regional insights into consumer spending, e-commerce and digital acceleration, travel, and economic policy and risks.

The institute was launched this year to analyse macroeconomic trends around the globe through the lens of the consumer, providing detailed and actionable insights on economic issues for key customers, partners and policymakers.

“This year put us all to the test," said Bricklin Dwyer, Mastercard’s chief economist. "We’ve become more distanced, more digital and more domestically focused. We made a dramatic digital leap forward, and saw incredible resilience from small business owners, consumers and policymakers looking to keep us on track. 2021 will not bring a light-switch return to life before COVID. With a vaccine in sight, we expect a gradual yet uneven recovery that highlights the benefits of embracing digital and low-touch experiences.”

6 key trends

Dwyer shared the following six critical trends for 2021 in his blog on the Mastercard website:

1 - The 'E-Conomy' is here to stay

In 2020, businesses and consumers turned online with urgency, and it is estimated that, globally, 20-30% of the peak in the COVID-related shift to e-commerce will stick around permanently. In the US, this was equivalent to a two-year acceleration in the shift to e-commerce. From contactless payments and pick-up to tele-everything, digital adoption was multi-generational (meaning that grandparents are savvy online shoppers now too).

2 - Welcome to digital Main Street

As many local restaurants and shops closed, 74% of new retail business created in the US since April were not brick-and-mortar retailers, according to our analysis of data from the US Census. Dwyer believes this trend will continue, with more and more businesses opting for virtual storefronts to reach more customers while minimising costs.

3 - Home is where the spending is 

Kitchen tables became classrooms and bedrooms turned into home offices as shutdowns led people to spend more time - and money - at home. In 2021, people are expected to continue to invest in their homes, with sectors such as home furnishings and hardware reaping the benefits everywhere from Brazil to Australia and from the US to the UK. Additionally, in many Western countries consumers have shifted living and working away from central business districts, which will have a lasting effect on cities. In the UK, for example, house prices hit a four-year high outside of London.

4 - Grounded international travel brings domestic resurgence 

For economies and sectors dependent on travel, the pandemic has been particularly hard-hitting. However, as travel disruptions persist, there is an emerging benefit to markets that typically have a tourism deficit (more travellers go out than in), such as China, the UK and Singapore. For China, 1.7% of GDP is typically spent on tourism in other countries; bringing that travel spending back home stands to lift economic growth substantially.

5 - Uneven recovery

The pandemic has created a multi-speed global recovery that favours high-income consumers over low and has created a significant job divide for minorities, women and younger workers. Among the 38 countries in the Organisation for Economic Co-operation and Development, employment is down 6.3% for women and 5.2% for men overall; 24 countries have seen a bigger decline in employment for females. Meanwhile, rising prices for housing and stocks have exacerbated income disparities. Government and central-bank stimulus policies that steered economies away from worst-case scenarios are ending, but targeted intervention will likely be necessary to aid those hardest hit.

6 - Government debt grows, while consumers save more 

The 2020 fiscal stimulus programmes dwarfed those from the 2008 financial crisis, with the US Federal Reserve’s balance sheet growing as much in six months as over the prior 12 years. Even emerging markets jumped on board the bandwagon to inject money into their struggling economies. In the meantime, consumers shifted into saving mode, carrying less debt than they have in years past.

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