The global economy is to have a subdued recovery this year from the COVID-19 pandemic, but the near-term outlook is highly uncertain and growth could be imperiled if COVID-19 infections and delays in the rollout of vaccines continue, the World Bank said on Tuesday.
In its new Global Economic Outlook, the World Bank forecast 4 percent growth this year following a 4.3 percent decline last year, the biggest plunge in global output since a contraction of 9.8 percent in 1945, as nations demobilized at the end of World War II.
By comparison, the global recession triggered by the Great Depression of the 1930s saw growth shrink by 4.8 percent on average from 1930 through 1932. The 2008-2009 financial crisis triggered a 1.8 percent drop in global output in 2009.
Photo: EPA-EFE
“If history is any guide, the global economy is heading for a decade of growth disappointments, unless policymakers put in place comprehensive reforms,” the bank said, citing the global pandemic layered over economic trends already in play.
“While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges in public health, debt management, budget policies, central banking and structural reforms,” World Bank president David Malpass said.
The bank said that global growth this year would be aided by a recovery of 3.5 percent in GDP growth in the US and an even bigger 7.9 percent rebound in China, the world’s two biggest economies.
For last year, the World Bank expects GDP in the US to fall by 4.3 percent, while it predicted a modest 2 percent increase in China.
Because of the uncertainty caused by the rise in COVID-19 cases and initial problems in distributing vaccines, the World Bank said that its forecast is highly uncertain.
Under a scenario where virus cases continue to rise and the rollout of vaccines does not accelerate, global growth could be reduced to a meager 1.6 percent this year.
The new report increased global growth for last year by 0.9 percentage points from its June forecast, reflecting in part better-than-expected performance in China and the US, but the forecast trimmed the outlook for this year by 0.2 percentage points.
For the US, the decline for last year was revised upward by 2.5 percentage points to a smaller decline of 3.6 percent, and the 3.5 percent rebound for this year was lowered by half a percentage point.
To combat the sharp downturn, the World Bank has made US$160 billion available to help more than 100 countries protect the poor, support firms and bolster the recovery.
Malpass told reporters that the World Bank is making US$12 billion available to provide 1 billion COVID-19 vaccinations in poor countries.
“People at the bottom of the income scale were hardest hit by the shutdowns and recession, and will most likely be the slowest to regain jobs and get vaccinations,” Malpass said.
The World Bank expects the eurozone to have a 7.4 percent drop in growth for last year followed by a 3.6 percent this year, while growth in Japan is expected to fall 5.3 percent last year and then rebound by 2.5 percent this year.
For all advanced economies, the World Bank predicted a drop of 5.4 percent last year and a rise of 3.3 percent this year.
For emerging markets and developing countries, the bank said that when all figures are reported, growth is expected to have declined 2.6 percent last year and increased 5 percent this year.
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