- ECONOMIC IMPACT -

Latest update: 6 May

After months of decline, GDP estimates for many countries have turned positive.

According to the OECD, the unemployment rate in OECD nations stood at 6.7% in February 2021.

6%

The IMF has raised its world economic growth forecast for 2021 to 6% from its earlier projection of 5.5% in January.

3.7%

The ifo Institute of Germany has cut its 2021 economic growth forecast for the country to 3.7% from its earlier projection of 4.2%.

Global real GDP growth

% change on previous year

2.6%

-3.7%

5.4%

Pre-Covid-19 2020 forecast

Adjusted 2020 forecast

2021 consensus
forecast

The cost of Covid-19

$375bn

Estimated monthly cost of the Covid-19 pandemic globally

$11tn

Cumulative loss for global economy over the next two years

- The road to economic recovery -

The global economy is forecast to return to pre-crisis levels by the end of 2021 or early 2022.

The global economy is projected to grow at record speed in 2021, but the outlook is uncertain and will depend on the effectiveness and distribution of the vaccines and on continued fiscal and monetary support. Recovery will be uneven across countries, sectors, and income levels.

China was the only major economy to achieve positive GDP growth in 2020. Covid-19 related exports led the economic recovery. In 2021, China is expected to account for 27% of global economic growth - more than twice as much as the US.

- SECTOR IMPACT: Aerospace, defence and security -

Defence markets are starting to look vulnerable in many parts of the world as national debates are ignited around fiscal priorities. The future role of the military in supporting civil contingency planning is also under consideration.

Western supply chain concerns stemming from Chinese-US rivalry have been exacerbated by Covid-19. This will result in greater FDI scrutiny, multisourcing and onshoring in key product areas such as microelectronics.

Sector indices

The interdependent relationship between aerospace and defence has helped to cushion the impact of Covid-19 on companies working across both segments. Targeted government aid will be instrumental to recovery in these sectors.

Sub-sector impact

Revenue predictions

Boeing and Airbus post unprecedented losses throughout the year, with last quarter being the worst on record for the global aerospace industry.


Defence is being used as a stimulus measure in markets with large domestic capacity, particularly the US, but there will be medium-term constraint due to fiscal pressures.

Military aerospace: moderate negative impact

Supply chain disruption from commercial aerospace impact and Covid-19 overall, and possible impact on low TRL level programmes or legacy support programmes in favour of active production lines as an immediate stimulus measure. US Air Force modernisation strategy could be impacted.

Land platforms: moderate negative impact

Elements of limited exposure to broader automotive industry supply chains but little impact on programmes so far. Higher levels of domestic capability across regions compared to naval and aerospace and less regulated supply chains mean future readjustment should be easier.

Homeland security & soldier systems: moderate positive impact

Thermal imaging, decontamination systems, deployable medical and personal protective equipment markets are seeing an immediate boost.

Credit: L3Harris

C4ISR and EW: moderate positive impact

Military cybersecurity IT subsectors well positioned in the medium term as a result of demands on distributed working and secure collaboration.

Naval shipbuilding: moderate negative impact

Mostly short-term production challenges; defence demand impact only extant in the medium term.

Uncrewed systems: moderate positive impact

Demand for small form factor drones has increased, with adjustment of civil aviation restrictions being made to allow for this in many regions.

Training & simulation: moderate positive impact

Adoption of distributed synthetic training environments is likely to increase in the medium term.

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