The global economy, which has plunged into a severe contraction, will contract by 5.2% this year due to the massive shock of the coronavirus pandemic and measures to contain it, the World Bank announced on Monday.
The COVID-19 recession is the first since 1870 to be triggered only by a pandemic, said World Bank President David Malpass in his preface to the latest edition of the Global Economic Prospect report released on Monday.
“The speed and depth with which it struck suggests the possibility of a slow recovery which could force policy makers to consider additional interventions,” he said.
For many emerging markets and developing countries, however, effective financial support and mitigation are particularly difficult to achieve since a substantial share of employment is in the informal sectors, said the chairman of the multilateral lender based in Washington.
According to the report, economic activity in advanced economies is expected to decline by 7% in 2020, as domestic demand and supply, trade and finance have been severely disrupted.
Emerging markets and developing economies (EMDE) are expected to decline 2.5% this year, their first contraction as a group in at least 60 years, the report said.
Per capita income is expected to drop 3.6%, which will plunge millions of people into extreme poverty this year, according to the report.
The blow hits the hardest in countries where the pandemic has been the most severe and where dependence on world trade, tourism, commodity exports and external finance is high, he said. added.
While the magnitude of the disturbance will vary from region to region, all EMDEs have vulnerabilities that are amplified by external shocks. In addition, disruptions in education and access to primary health care are likely to have lasting impacts on human capital development, the bank said.
“This is a sobering perspective, with the crisis likely to leave lasting scars and pose major global challenges,” said Ceyla Pazarbasioglu, vice president of the World Bank Group for Fair Growth, Finance and the institutions.
“Our primary goal is to respond to the global economic and health emergency. Beyond that, the global community must unite to find ways to rebuild a recovery as robust as possible to prevent more people from falling into the poverty and unemployment, “he said.
World Bank Outlook Group Director Ayhan Kose said the COVID-19 recession is unique in many ways and will likely be the deepest of the advanced economies since World War II and the first contraction of production in emerging and developing economies in at least the past six decades.
“The current episode has already experienced by far the fastest and steepest downgrades in global growth forecasts ever recorded. If the past is a guide, there could be further declines in store growth, implying that policymakers may need to be prepared to employ additional measures to support activity, “he said.
World Bank President Malpass says Beyond the staggering economic impacts, the pandemic will also have serious and lasting socio-economic impacts that may well weaken long-term growth prospects – the fall in investment due to the high uncertainty, the erosion of the human capital of the legions of unemployed and the potential for disruption of trade and supply links.
He said the speed and strength of the recovery will depend on the effectiveness of the support programs that governments and the international community are putting in place; and critically on what policy makers are doing to respond to the new environment.
The World Bank report indicates that the world economy has experienced 14 world recessions since 1870: in 1876, 1885, 1893, 1908, 1914, 1917-21, 1930-32, 1938, 1945-46, 1975, 1982, 1991 , 2009 and 2020.
Current projections suggest that the COVID-19 recession will lead to a 6.2% drop in gross domestic product (GDP) per capita, making it the deepest global recession since 1945-1946, and more than twice as deep. as the recession associated with the global financial crisis, the report says.
Current forecasts suggest that by 2020, the highest share of economies will contract annual GDP per capita since 1870, according to the report.
The share of economies in recession will be more than 90%, even higher than the proportion of about 85% of countries in recession at the height of the Great Depression of 1930-1932, he added.
According to Johns Hopkins Coronavirus Resource Center, the coronavirus has infected more than 70,000,000 people and killed more than 4,000,000 worldwide. The United States is the most affected country with more than 1.9 million cases and more than 1,100,000 deaths.
(With the exception of the title, this story was not edited by GalacticGaming staff and is published from a syndicated feed.)