The global economy, which has fallen sharply, will shrink by 5.2 percent this year due to the massive shock of the coronavirus pandemic and measures to contain the coronavirus, the World Bank said on Monday.
The COVID-19 recession is the first since 1870 to be triggered solely by a pandemic, World Bank President David Malpass said 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 sluggish recovery that may require policymakers to consider additional interventions," he said.
For many emerging and developing countries, however, effective financial support and mitigation measures are particularly difficult to achieve because much of the employment is in informal sectors, said the president of the Washington-based multilateral lender.
According to the report, economic activity in advanced economies is expected to shrink by seven percent in 2020 as domestic demand and supply, trade and finance are severely disrupted.
Emerging and developing countries (EMDEs) are expected to shrink 2.5 percent this year, their first decline as a group in at least 60 years.
Per capita income is expected to decrease by 3.6 percent, which according to the report will lead millions of people to extreme poverty this year.
The blow is hardest hit in countries where the pandemic has been most severe and where there is a strong dependency on world trade, tourism, raw material exports and external finance.
While the extent of the disruption will vary from region to region, all EMDEs have weaknesses that are exacerbated by external shocks. In addition, interruptions in schooling and access to basic services are likely to have a lasting impact on human capital development, the bank said.
"This is a deeply sobering perspective as the crisis is likely to leave lasting scars and major global challenges," said Ceyla Pazarbasioglu, World Bank Group vice president for just growth, finance and institutions.
"Our first task is to address the global health and economic plight. The global community must also join forces to find ways to rebuild the most robust recovery possible and to prevent more people from falling into poverty and unemployment," said he.
World Bank Prospects Group director Ayhan Kose said that the COVID-19 recession is unique in many ways, and is likely to be the deepest in advanced economies since World War II and the first decline in emerging and developing countries, at least in the United States is expected to last six decades.
"In the current episode, the fastest and steepest downgrades in global growth forecasts have already been recorded. If the past is a clue, further growth downgrades may be imminent, which means that policymakers may have to be ready to take additional action Support activity, "he said.
According to Malbank President Malpass, in addition to the dizzying economic effects, the pandemic will also have serious and lasting socio-economic effects that can weaken long-term growth prospects – the slump in investment due to heightened uncertainty, the erosion of human capital from the legions of unemployed people and the potential for interruptions in trade and supply relationships.
He said the speed and strength of the recovery would depend on the effectiveness of the government and international community support programs now in place; and critical of what policymakers are doing to respond to the new environment.
According to the World Bank report, the global economy has experienced 14 global recessions since 1870: 1876, 1885, 1893, 1908, 1914, 1917-21, 1930-32, 1938, 1945-46, 1975, 1982, 1991, 2009 and 2020.
Current forecasts indicate that the COVID-19 recession will lead to a 6.2 percent decline in global GDP per capita. It is the deepest global recession since 1945/46 and more than twice as deep as the recession associated with the global financial crisis, the report said.
Current forecasts assume that the highest proportion of economies in 2020 will see a decline in annual GDP per capita since 1870.
The share of economies in the recession will be more than 90 percent, even more than the share of about 85 percent of the countries in recession at the height of the 1930/32 Great Depression, he added.
According to the Johns Hopkins Coronavirus Resource Center, the coronavirus infected over 70,000 people and killed more than 4,000 people worldwide. The United States is the worst affected country, with over 1.9 million cases and more than 1,10,000 deaths.
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