Around this time last year, economists were predicting the worst fate for the world since the Great Depression of the 1930s. Forecasts are astoundingly rosier now, including the latest by the International Monetary Fund (IMF) that says the global economy is expected to expand by 6 per cent this year after shrinking 3.3 per cent last year. What changed the course most decisively was quick intervention by governments which extended a stabilising IV drip in the form of fiscal support to the tune of US$16 trillion (S$21.5 trillion) since the Covid-19 pandemic began wrecking economies. The IMF estimates that the economic collapse could have been three times worse than it has been had it not been for governmental action that succeeded in boosting global gross domestic product growth by a full 6 percentage points last year.

Optimism is especially high in the United States where the IMF expects the economy to expand by 6.4 per cent this year. The growth in the euro zone is forecast at 4.4 per cent, and in Japan at 3.3 per cent. China, which was the earliest to turn the corner after the pandemic, is projected to expand by 8.4 per cent, while India will set the pace at 12.5 per cent. Singapore's official forecasts show the economy is poised to grow by between 4 per cent and 6 per cent this year after contracting by 5.4 per cent last year. The 24 economists surveyed by the Monetary Authority of Singapore last month were optimistic that it would touch 5.8 per cent, making this the fastest growth in a decade.

But the world may have to also prepare for less than favourable outcomes. Forecasts can be too easily derailed by the prevalence of more potent variants of the virus that require booster jabs and further complicate the faltering distribution of vaccines worldwide. Even if things appear to be going well, policymakers will need great skill to wean economies off fiscal support. A sudden break could trigger high unemployment and bankruptcies. Caution can be drawn from the aftermath of the 2008 financial crisis when governments withdrew measures before economies could cope. Another risk arises from uneven recoveries between nations that can create disruptive capital flows if not managed well.

To navigate around this, action must be taken now to create cross-border synchronisation of economic policies. As the recovery gains ground, the moment would be right to address chronic ailments in global economies. The pandemic caused an estimated 95 million people to fall into extreme poverty last year while the scale of the undernourished grew by 80 million. Post-pandemic priorities must include building inclusive and greener economies. To improve productivity and address rising income inequality, investments must be made in health, education and digital infrastructure as well as the reskilling of workers.