GLOBAL – The World Bank Group has released its updated economic outlook for 2020, predicting that the global economy will shrink by 5.2% this year, the worst recession ever to be experienced in the world since World War II.
The World Bank owes the contractions to the swift and massive shock of the coronavirus pandemic that resulted in countries enforcing shutdown measures that brought production to a halt in almost all sectors of the economy.
According to the World Bank, the largest fraction of economies will be worst hit, experiencing declines in per capita output since 1870.
Economic activity among advanced economies is anticipated to shrink by 7% in 2020 as domestic demand and supply, trade, and finance have been severely disrupted.
Emerging market and developing economies (EMDEs), on the other hand, are expected to shrink by 2.5% this year, their first contraction as a group in at least sixty years, the World Bank economic outlook noted.
World Bank further noted that per capita incomes are expected to decline by 3.6%, which will tip millions of people into extreme poverty this year.
The blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing.
While the magnitude of disruption will vary from region to region, all EMDEs have vulnerabilities that are magnified by external shocks.
“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu.
Pazarbasioglu further noted that “the global community must unite to find ways to rebuild as robust a recovery as possible to prevent more people from falling into poverty and unemployment.”
Under the baseline forecast, global growth is forecast to rebound to 4.2% in 2021, as advanced economies grow 3.9% and EMDEs bounce back by 4.6%.
However, the outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages.
A downside scenario could lead the global economy to shrink by as much as 8% this year, followed by a sluggish recovery in 2021 of just over 1%, with output in EMDEs contracting by almost 5% this year.