The World Bank Group has forecast that the global economy will this year experience its worst recession since the Second World War and is expected to contract by 5.2 per cent.
According to the World Bank Group’s June 2020 Global Economic Prospects, the swift and massive shock of the coronavirus pandemic and shutdown measures to contain it have plunged the global economy into a severe contraction.
Among the effects of the recession is economic activity among advanced economies is anticipated to shrink by 7 per cent in 2020 as domestic demand and supply, trade, and finance have been severely disrupted.
Emerging market and developing economies are expected to shrink by 2.5 per cent this year, their first contraction as a group in at least sixty years which risks tipping millions of people into extreme poverty this year.
In Sub-Saharan Africa, economic activity in the region is on course to contract by 2.8 per cent in 2020.
The World Bank noted that the blow could be hardest hitting in countries where there is heavy reliance on global trade, tourism, commodity exports, and external financing.
“While the magnitude of disruption will vary from region to region, all emerging market and developing economies have vulnerabilities that are magnified by external shocks. Moreover, interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development,” the World Bank noted.
“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. 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,” said World Bank Prospects Group Director Ayhan Kose.
World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu termed it as a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges.
“Our first order of business is to address the global health and economic emergency. Beyond that, the global community must unite to find ways to rebuild as robust a recovery as possible to prevent more people from falling into poverty and unemployment,” Pazarbasioglu noted.
The baseline forecast is partly built on an assumption that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and shortly after in emerging economies.
The optimism in the forecast is that effects on financial markets are not long-lasting with global growth is forecast to rebound to 4.2 per cent in 2021.
The World Bank recommended that emerging markets and developing economies with available fiscal space and affordable financing conditions could consider additional stimulus if the effects of the pandemic persist.
“This should be accompanied by measures to help credibly restore medium-term fiscal sustainability, including those that strengthen fiscal frameworks, increase domestic revenue mobilization and spending efficiency, and raise fiscal and debt transparency. The transparency of all government financial commitments, debt-like instruments and investments is a key step in creating an attractive investment climate and could make substantial progress this year,” the World Bank noted.
In a bid to facilitate survival through the hard times, Local businesses have been invited to begin applying for funding under the Economic Recovery Fund (ERF), a two-year facility established by Government to cushion businesses affected by the Covid-19 pandemic.
The recovery fund is an intervention developed to support businesses that have been highly impacted by the crisis so they can survive, restart work and safeguard employment.Follow https://twitter.com/ByCollinsMwai