No matter where we are, we can all agree that the world has changed. We’ve become more distanced, more digital, and more domestically focused. This year won’t bring a light-switch return to what life was like before covid – and perhaps it shouldn’t. The acceleration of key trends that we’ve experienced over the past year—such as the shift to digital—will continue to define our lives in 2021.
We have just released the Mastercard Economics Institute’s Economy 2021, which gives us some outlook on what’s to come. The Institute was launched last year to analyze the most critical global trends through consumer optics. Building on the Recovery Insights series, we conceived this report as a way to help governments and businesses of all sizes move forward after a grueling (and transformative) 2020 in just about every economy worldwide.
Together with a team of data scientists and economists, we assessed key economic indicators, paired with an analysis of anonymized and aggregated sales activity across the global Mastercard network. In doing so, we uncovered several critical trends:
The E-Conomy is here to stay and more players are making their debut.
E-commerce spending jumped significantly from its pre-crisis levels, from about 10% of overall retail sales in Brazil to 16% at its peak. While e-commerce adoption in Latin America and the Caribbean is low compared to other regions, we expect that about 20%–30% of the covid-related surge in e-commerce globally will be a permanent bump in its share of overall retail spending. Notably, the adoption of financial services delivered via online channels and other digital services are growing in popularity among the lower-income demographic, and this trend is likely to continue well into 2021.
Moreover, international e-commerce giants are trying to penetrate the South American market, so the competition will likely spur growth. This expansion, along with a sticky e-commerce demand, could result in growth for commercial-warehouse leasing and jobs based on the growing need for storage and delivery services.
Hits to remittances and tourism will continue.
A double hit comprised of a slowdown for international tourism and a drop in remittance flows will be detrimental to growth, especially for many of the region’s small, externally positioned economies. In terms of the remittance flows, Central American economies are most exposed to declines, followed by Mexico, Peru and Ecuador.
Regarding tourism, it is safe to say that Carnival 2021 celebrations will look a lot different from how we knew them in years past as both international and domestic tourists adhere to mobility restrictions.
Eco-tourism takes center stage in the travel industry.
New travel opportunities have arisen to compensate for the drop in international tourism that is likely to weigh heavily on the region, and eco-tourism has been taking off in Medellin, Colombia, for instance, and could provide a competitive advantage as tourists shift their travel preferences from densely populated cities to getaway destinations.
Higher prices for selected commodities could boost industry and the agriculture industry.
Due to the demand coming from China, higher prices for metals such as cooper, iron ore, gold and soybeans can be expected, which is good news for exporters such as Brazil, Chile and Peru.
Fiscal stimulus and vaccine deployment are expected to be the beacon of hope for economic growth.
Consumer confidence remains soft due to the considerable uncertainty surrounding the virus and the economy.
2020 put us all to the test. We made a dramatic digital leap forward. We have seen incredible resilience from small business owners, consumers and policymakers looking to keep us on course. We have also seen an increase in social unrest around the world, which has often been tied to local unemployment. Risks—from covid lockdowns to climate change—put social inequities in stark focus.
With a vaccine in sight, we will be able to rebuild the connections lost this past year and forge a more resilient future—one that allows for inclusive, sustainable growth that will benefit individuals and businesses alike.
Bricklin Dwyer is chief economist of Mastercard.
This article is part of a broader series on digital finance in partnership with Mastercard. Explore the full series here.