Five Megatrends to Watch in 2021
2021 will be a year of interactions between the COVID-19 pandemic, economic recovery and fractured geopolitics. The new year will start with mobilization of a global effort to bring the coronavirus under control through distribution of vaccines, a new administration taking office in Washington with a crowded agenda, and hopefully a chance for business and societies to begin to reengage in activities delayed or cancelled by the pandemic, from travel and cultural events to trade fairs and some level of a return to workplaces. Here are five trends that will shape our world in 2021.
#1: Vaccines and treatments are coming, but deployment will challenge governments and health systems.
Scaling up manufacturing, supply chain logistics, training and vaccine politics will complicate their global deployment. Vaccine nationalism may create tensions among countries and across demographic groups over access, effectiveness and safety. Vaccine misinformation may impact public acceptance. Companies will need to create new business strategies and workforce engagements once vaccines and treatments reduce the public health threat.
Administering more than a billion competing vaccine doses worldwide will present challenges for governments and their overburdened healthcare systems. But millions of lives, social cohesion and economic recovery will be at stake.
#2: Even if vaccines are successful, the global economic recovery will be uncertain and uneven.
The prospects for the global economy in 2021 rests with the spread or control of COVID-19. Governments will need to make difficult decisions on continuing or withdrawing fiscal aid to domestic companies and workers. Central banks will continue an accommodative monetary policy, providing financial sector stability. Debt and deficits crises may emerge. As vaccines are deployed, restrictions on mobility will be lessened progressively.
Recovery will be uneven across markets and sectors. China and East Asian markets will drive global growth, followed by the United States, with Europe, India, Australia, Latin America and MENA recovering slower. Global trade and cross-border investment will recover if countries do not erect protective barriers. The gap between rich and poor will widen, with uncertain social consequences. If the COVID threat diminishes, the global economy may expand by 4–5% in 2021, after an expected 4.2% decline this year.
#3: Geopolitical tensions will continue as countries pursue their national interests.
The United States, Europe, China, Russia and India are vying for geopolitical, economic, technology and security influence, creating a fractured global order and potential disruptions for business. Competing political and economic models are being tested for their ability to provide stability, economic and social progress.
The incoming Biden administration pledges cooperation with European and Asian allies to counter China, Russia and Iran. The president-elect pledges the United States will reengage on the global stage, but some world leaders may consider the other superpower, China, a more reliable partner, or at least one they do not want to challenge. Countries will pursue competing national interests. Europe wants to set global standards on tech and climate. The UK and EU will experience their first year apart. China is pursuing a global strategy that creates tension with the US, Europe and its Asian neighbors. Tensions will also remain between Japan and South Korea. Germany and Japan will hold national elections. The NATO alliance will look to shore up transatlantic security ties. The United States will mark the 20th anniversary of the terror attacks on New York and Washington on September 11, 2001. One sign of hopefulness: 50 countries have now signed the Treaty on the Prohibition of Nuclear Weapons (TPNWW), which means it can come into force in early 2021. But unfortunately, none of the world’s existing nuclear powers plan to sign.
Global companies and regional powers will be caught in the crosshairs and will have to navigate an increasingly complex geopolitical landscape.
#4: 2021 will be a critical year to turn the corner on climate.
Global climate policy will enter a more active phase as countries and global companies make new commitments ahead of next year’s COP-26 climate summit. The European Union is advancing a green plan to be climate neutral by 2050. China, South Korea and Japan have announced carbon neutrality targets. President-elect Biden will prioritize climate in both US domestic policy and international relations. The World Bank and IMF are urging countries to build climate action into their pandemic and economic recoveries. Investors are integrating climate risk into decision-making. Total investments in renewables will exceed those in fossil fuels for the first time ever in 2020, according to the International Renewable Energy Agency. The transport sector is on verge of a major revolution as battery-powered e-mobility continues to scale up.
Momentum for climate action has been building for decades, but progress has been disappointing. The COVID pandemic has reinforced the need for finance and industry to step up, sharpened awareness about our climate vulnerabilities and changed perceptions about long-term, science-informed risks. Countries will be under pressure to step up their Nationally Determined Contributions (NDCs) ahead of the COP-26 climate summit in November.
Market-led efforts, policy changes and recovery plans also set the stage for major systems changes. This means companies must review their climate actions in 2021 amidst growing pressure from regulators, activists, investors, employees and consumers. The urgency for climate action will drive country and business reputation, risk and competitiveness.
#5: Industries and societies will reboot in 2021 and define the now normal.
The pandemic has left destruction across economies and societies, shaking up global business, travel, retail, health, education, culture and politics. Events from the Tokyo Olympics and Dubai World Expo to thousands of sporting contests, cultural activities and business conferences, trade shows and political summits were postponed or held virtually.
2021 will be a year to measure the aftershocks: Will industries hardest hit by the pandemic and recession — travel, entertainment, food and other services — recover or continue to struggle? Will countries value science and prioritize collaboration on shared challenges? Will we rebuild “greener?” What changes to the way people now work, shop, learn, tech and interact will remain after the COVID threat passes and which will snap back? Will innovation and digitalization continue at the warp speed of this year? Finally, what lessons will the pandemic offer to prepare us for future crises?
If 2020 was the year of disruption, 2021 will be a year to reboot and define the now normal.
Edited by Nicole Sheehan
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