Global Developments in 2021

The global economy entered into a recovery phase in 2021, supported by a rebound in global manufacturing and trade activities. However, the recovery was uneven across countries given the disparity in access to vaccines and policy support. Advanced economies (AE) recorded stronger growth momentum while recovery in emerging market economies (EME) was relatively weaker. 

The emergence of the highly transmissible COVID-19 Delta variant also prolonged pandemic-related disruptions, as countries worldwide reimposed various containment measures. While restrictions were gradually relaxed towards the end of 2021, longer-than-expected supply disruptions, as well as higher commodity prices and food inflation, continued to affect global economic recovery throughout the year.

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Global financial stress levels remained low in 2021, a continuation from the end-2020 environment. Nevertheless, intermittent episodes of volatility were experienced throughout the year amid a confluence of factors.

Office of Financial Research (OFR) Global Financial Stress Index (FSI) and Malaysia FSI
Note: The Global FSI is from the OFR, US Department of Treasury, while the Malaysia FSI is internally estimated following similar methodology (see Monin, 2017). Value of FSI above zero indicates higher than historical average financial stress in the economy.
Source: US Office of Financial Research, the SC’s internal estimates.

Global financial markets performances were mixed in 2021 amid a confluence of factors, from concerns over the durability of global economic recovery and the pace of monetary policy normalisation in AEs to contending geopolitical dynamics and the emergence of the new Omicron COVID-19 variant towards the end of the year. This resulted in intermittent global financial market volatility, with diverging performances across asset classes and regions. However, the overall level of global financial stress remained low compared to the year 2020.

In the global equity market, the MSCI World Index recorded multiple rallies, rising by 20.1% on AEs’ growth outlook and favourable corporate earnings. Meanwhile, the MSCI Emerging Markets Index declined by -4.6%, weighed down by subdued EMEs’ growth prospects, including China’s softening economic momentum and uncertain policy directions. In the global bond market, yields rose from beginning 2021, led by the US Treasury 10-year note on expectations of higher inflation and tighter global monetary policy stance.


Global equities and bonds registered mixed performances in 2021.

Performance of global equity market
Performance of global bond market
Source: Thomson Reuters Datastream, the SC’s calculations.
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