Covid-19 Pandemic to Shrink 2020 Global Economy by 5.2%, Says World Bank

The coronavirus pandemic could shrink global economy by 5.2% this year, the worst recession since World War II and almost three times as bad as 2009 financial crisis, said the World Bank on Monday.

 

In January, the World Bank had forecast 2.5% growth for the global economy in 2020.

 

Economic activity among more advanced economies is anticipated to shrink 7% in 2020 due to widespread of virus control measures that disrupted domestic demand and supply, trade, and finance severely, while emerging market and developing economies (EMDEs) are expected to shrink by 2.5%. Per capita incomes are expected to decline by 3.6%, which will push millions of people into extreme poverty this year, the World Bank said in its June 2020 Global Economic Prospects.

 

World Bank expected global economy to bound back to 4.2% growth in 2021, as advanced economies grow 3.9% and EMDEs rebounce to 4.6%, but warned that “even worse scenario is possible” as the outlook is highly uncertain and there is a possible resurgence of the coronavirus, the biggest risk to the economy.

 

“The COVID-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since the Second World War and the first output contraction in emerging and developing economies in at least the past six decades,” said World Bank Prospects Group Director Ayhan Kose. “The current episode has already seen by far the fastest and steepest downgrades in global growth forecasts on record. If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity.”

 

For the East Asia and Pacific outlook, World Bank predicted region growth to shrink 0.5% in 2020, the lowest rate since 1967. Meanwhile Thailand, Malaysia and Indonesia are among major economies of the region to face the biggest contractions this year with the shrink of 5%, 3.1% and 1.9% respectively, mainly affected by country shutdowns, reduced tourism, disrupted trade and manufacturing, and spillovers from financial markets.