The year 2021 was, in many respects, a recovery year for global financial markets, but it was also the point at which the limits of that recovery became clearer. The IMF projected global growth of 5.9% in 2021, supported by reopening, strong policy support and improved confidence, yet it also warned that the rebound had become more uneven because of supply disruptions, renewed pandemic pressures and differing access to vaccines. Financial markets remained buoyed by abundant liquidity, but the optimism of early 2021 gradually gave way to more concern about inflation, valuations and the durability of the recovery.

The IMF’s Global Financial Stability Report noted that financial stability risks had been contained so far thanks to policy support, but vulnerabilities remained elevated, asset valuations were stretched in some segments, and emerging and frontier markets still faced significant financing needs alongside higher funding costs. This made 2021 a year of strong market performance on the surface, but with increasingly visible fault lines underneath.

Asia remained the fastest-growing region in the world, yet here too the recovery became more uneven as the year progressed. The IMF downgraded the Asian outlook for 2021 to 6.5%, citing new peaks in the pandemic cycle driven by the Delta variant, and stressed that the divergence between advanced Asian economies and emerging market and developing economies was deepening. ADB similarly described the regional recovery as uneven, forecasting 7.1% growth in developing Asia in 2021 and 5.4% in 2022. The broad message was that Asia still led the global recovery, but no longer as a single, uniform story.

For investors and policymakers, 2021 therefore became a bridge year between emergency stimulus and a more fragmented post-pandemic landscape. Reopening momentum, digitalisation and strong domestic demand supported activity in many parts of Asia, but supply bottlenecks, vaccination gaps and rising inflation expectations began to reshape market thinking. By the end of the year, the central question was no longer simply how quickly economies could rebound, but how long markets could sustain elevated valuations once policy support became less certain.