The global economy, which has plunged into a severe contraction, will shrink by 5.2 per cent this year due to the massive shock of the coronavirus pandemic and the shutdown measures to contain it, the World Bank has said.
In his foreword to the latest edition of the Global Economic Prospect report, World Bank President David Malpass said the Covid-19 recession is the first since 1870 to be triggered solely by a pandemic.
He said, “the speed and depth with which it has struck, suggests the possibility of a sluggish recovery that may require policymakers to consider additional interventions.”
According to the World Bank, for many emerging markets and developing countries, however, effective financial support and mitigation measures are particularly hard to achieve because a substantial share of employment is in informal sectors.
The report said economic activity among advanced economies is anticipated to shrink by seven per cent in 2020 as domestic demand and supply, trade and finance have been severely disrupted.
Emerging Markets and Developing Economies (EMDEs) are expected to shrink by 2.5 per cent this year, their first contraction as a group in at least 60 years, it said and added that per capita incomes are expected to decline by 3.6 per cent, 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, it added.
The bank said while the magnitude of the disruption will vary from region to region, all EMDEs have vulnerabilities that are magnified by external shocks. Moreover, interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development. World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu said,
“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges.’ He added: ‘Our first order of business is to address the global health and economic emergency. Beyond 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.”
World Bank Prospects Group Director Ayhan Kose said the COVID-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since the World War-II and the first output contraction in emerging and developing economies in at least the past six decades. There may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support economy.