The coronavirus pandemic will contract the world economy by 5.2%, but next year it will rebound

8 June 2020
Economic Affairs

The World Bank foresees a contraction of the world economy of 5.2% in 2020. The contraction will be greater in advanced economies and less in emerging ones, although it will be the first time it has declined in this group of nations in 60 years. The good news is that the negative repercussions will fade during the second half of the year and global growth will rebound by 4.2% in 2021.

The sudden and widespread impact of the coronavirus pandemic and the suspension measures that were adopted to contain it have caused a drastic contraction of the world economy of 5.2% this year, according to the forecasts of the World Bank.

According to the June 2020 edition of the Bank’s World Economic Outlook report, this would be the worst recession since World War II, and the first time since 1870 that so many economies would experience a decline in per capita output.

Following severe distortions to domestic supply and demand, trade and finance, economic activity in advanced economies is forecast to contract by 7.0% in 2020 while in emerging markets and developing economies it will drop 2.5% this year, their first contraction as a group in at least 60 years.

The prospects are food for thought, as the crisis is likely to leave scars that are hard to erase and pose complex global challenges.

“The expected decrease in per capita income, of 3.6%, will push millions of people into extreme poverty this year,” says the World Bank.

The effects are being particularly profound in the countries most affected by the pandemic and in those that depend largely from international trade, tourism, commodity exports, and external financing.

While the magnitude of shocks will vary by region, all emerging and developing economies will experience vulnerabilities that are compounded by external shocks. Likewise, suspension of classes and difficulties in accessing primary health care services are likely to have long-term impact on human capital development.

“The prospects are food for thought, as the crisis is likely to leave scars that are hard to erase and pose complex global challenges,” said Ceyla Pazarbasioglu, vice president of Equitable Growth, Finance and Institutions at the World Bank Group. “Our first priority is to address the global health and economic emergency. Beyond that, the world community must unite to achieve the strongest possible recovery and prevent more people from falling into poverty and unemployment ”.

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Noticias ONU / Assumpta Massoi
Countries heavily dependent on tourism will suffer a greater economic impact from the coronavirus pandemic. In the image, view of the island of Zanzibar in Tanzania.

Located in time, but with uncertainties

According to baseline forecasts *, the negative impacts at the global level will decrease in intensity during the second half of the year and shocks to financial markets will not last over time.

Global growth is expected to rebound by 4.2% in 2021, namely 3.9% for advanced economies and 4.6% for emerging and developing countries.

However, prospects are highly uncertain and the risks of a worsening situation predominate, for example the possibility of the pandemic continuing for a longer time, financial turmoil, or a retreat in international trade and supply relationships.

In that scenario, the world economy could contract as much as 8% this year, to recover just above 1% in 2021.

The United States, Europe and Japan, the worst falls

The United States economy is forecast to contract 6.1% this year as a result of shocks linked to measures to control the pandemic. For the euro area, it is estimated that the product will fall 9.1% in 2020 due to the serious repercussions that the widespread outbreaks had on activity. Furthermore, a contraction of 6.1% is expected in the economy of Japan, whose economic activity has slowed as a result of prevention measures.

“The recession caused by COVID-19 is unique in several respects, and is likely to be the deepest for advanced economies since World War II and the first contraction in output in emerging and developing economies in at least the last few six decades, ”said Ayhan Kose, director of the World Bank’s Outlook Group.

There are no records of such sudden and drastic downward corrections of world growth forecasts such as those seen in the current era. If the past is any reference, the forecasts could get even worse, implying that policy makers should prepare for the possibility of having to take additional measures to support the activity.

Noticias ONU// Anton Uspensky
Image of Madrid.

Urgent political measures

The pandemic highlights the pressing need to promote policy measures in the health and economic fields, including international cooperation initiatives, in order to mitigate their effects, protect vulnerable populations, and strengthen the capacity of countries to prevent and deal with similar situations in the future.

Given their particular vulnerability, it is essential that emerging and developing countries strengthen their public health systems, face the challenges posed by informality and gaps in safety nets, and promote reforms that promote growth firm and sustainable after the crisis.

Emerging and developing countries with fiscal maneuverability and access to affordable financing terms could consider using additional stimuli if the effects of the pandemic are prolonged over time.

This strategy should be accompanied by measures that help to credibly restore medium-term fiscal sustainability, including those aimed at strengthening fiscal frameworks, increasing domestic revenue mobilization and spending efficiency, and improving fiscal and debt transparency.

The transparency of all financial commitments, analogous debt instruments and government investments is a key factor in creating a conducive environment for investment; this year, substantial progress could be made in that regard.

* In accordance with which the remission of the pandemic will allow the lifting of national mitigation measures in the middle of the year in advanced economies and a little later in emerging and developing countries.

8 June 2020
Economic Affairs

The World Bank foresees a contraction of the world economy of 5.2% in 2020. The contraction will be greater in advanced economies and less in emerging ones, although it will be the first time it has declined in this group of nations in 60 years. The good news is that the negative repercussions will fade during the second half of the year and global growth will rebound by 4.2% in 2021.

The sudden and widespread impact of the coronavirus pandemic and the suspension measures that were adopted to contain it have caused a drastic contraction of the world economy of 5.2% this year, according to the forecasts of the World Bank.

According to the June 2020 edition of the Bank’s World Economic Outlook report, this would be the worst recession since World War II, and the first time since 1870 that so many economies would experience a decline in per capita output.

Following severe distortions to domestic supply and demand, trade and finance, economic activity in advanced economies is forecast to contract by 7.0% in 2020 while in emerging markets and developing economies it will drop 2.5% this year, their first contraction as a group in at least 60 years.

The prospects are food for thought, as the crisis is likely to leave scars that are hard to erase and pose complex global challenges.

“The expected decrease in per capita income, of 3.6%, will push millions of people into extreme poverty this year,” says the World Bank.

The effects are being particularly profound in the countries most affected by the pandemic and in those that depend largely from international trade, tourism, commodity exports, and external financing.

While the magnitude of shocks will vary by region, all emerging and developing economies will experience vulnerabilities that are compounded by external shocks. Likewise, suspension of classes and difficulties in accessing primary health care services are likely to have long-term impact on human capital development.

“The prospects are food for thought, as the crisis is likely to leave scars that are hard to erase and pose complex global challenges,” said Ceyla Pazarbasioglu, vice president of Equitable Growth, Finance and Institutions at the World Bank Group. “Our first priority is to address the global health and economic emergency. Beyond that, the world community must unite to achieve the strongest possible recovery and prevent more people from falling into poverty and unemployment ”.

[Descarga nuestra aplicación Noticias ONU para IOS o Android. O subscríbete a nuestro boletín.]

Noticias ONU / Assumpta Massoi
Countries heavily dependent on tourism will suffer a greater economic impact from the coronavirus pandemic. In the image, view of the island of Zanzibar in Tanzania.

Located in time, but with uncertainties

According to baseline forecasts *, the negative impacts at the global level will decrease in intensity during the second half of the year and shocks to financial markets will not last over time.

Global growth is expected to rebound by 4.2% in 2021, namely 3.9% for advanced economies and 4.6% for emerging and developing countries.

However, prospects are highly uncertain and the risks of a worsening situation predominate, for example the possibility of the pandemic continuing for a longer time, financial turmoil, or a retreat in international trade and supply relationships.

In that scenario, the world economy could contract as much as 8% this year, to recover just above 1% in 2021.

The United States, Europe and Japan, the worst falls

The United States economy is forecast to contract 6.1% this year as a result of shocks linked to measures to control the pandemic. For the euro area, it is estimated that the product will fall 9.1% in 2020 due to the serious repercussions that the widespread outbreaks had on activity. Furthermore, a contraction of 6.1% is expected in the economy of Japan, whose economic activity has slowed as a result of prevention measures.

“The recession caused by COVID-19 is unique in several respects, and is likely to be the deepest for advanced economies since World War II and the first contraction in output in emerging and developing economies in at least the last few six decades, ”said Ayhan Kose, director of the World Bank’s Outlook Group.

There are no records of such sudden and drastic downward corrections of world growth forecasts such as those seen in the current era. If the past is any reference, the forecasts could get even worse, implying that policy makers should prepare for the possibility of having to take additional measures to support the activity.

Noticias ONU// Anton Uspensky
Image of Madrid.

Urgent political measures

The pandemic highlights the pressing need to promote policy measures in the health and economic fields, including international cooperation initiatives, in order to mitigate their effects, protect vulnerable populations, and strengthen the capacity of countries to prevent and deal with similar situations in the future.

Given their particular vulnerability, it is essential that emerging and developing countries strengthen their public health systems, face the challenges posed by informality and gaps in safety nets, and promote reforms that promote growth firm and sustainable after the crisis.

Emerging and developing countries with fiscal maneuverability and access to affordable financing terms could consider using additional stimuli if the effects of the pandemic are prolonged over time.

This strategy should be accompanied by measures that help to credibly restore medium-term fiscal sustainability, including those aimed at strengthening fiscal frameworks, increasing domestic revenue mobilization and spending efficiency, and improving fiscal and debt transparency.

The transparency of all financial commitments, analogous debt instruments and government investments is a key factor in creating a conducive environment for investment; this year, substantial progress could be made in that regard.

* In accordance with which the remission of the pandemic will allow the lifting of national mitigation measures in the middle of the year in advanced economies and a little later in emerging and developing countries.