By Team BiharConnect
Coronavirus pandemic has severely hit the economy across the world including India. The global economy is estimated to shrink by 5.2 per cent this year, the worst recession since World War II, the World Bank said in a report on Monday. India’s economy is estimated to contract by 3.2 per cent this year.
According to the World Bank’s Global Economic Prospects, the economic activity among advanced economies is anticipated to shrink 7 per cent in 2020 as domestic demand and supply, trade, and finance have been severely disrupted. Emerging market and developing economies (EMDEs) are expected to shrink by 2.5 per cent this year, their first contraction as a group in at least sixty years.
Per capita incomes are expected to decline by 3.6 per cent, which will tip millions of people into extreme poverty this year. The per capita incomes is projected to shrink in all regions across the world.
The blow is hitting hardest in countries where the pandemic has been the most severe and 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 EMDEs 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 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,” World Bank Prospects Group Director Ayhan Kose said in the report.
“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,” Kose added.
The US economy is forecast to contract 6.1 per cent this year, reflecting the disruptions associated with pandemic-control measures. Euro Area output is expected to shrink 9.1 per cent in 2020 as widespread outbreaks took a heavy toll on activity. Japan’s economy is anticipated to shrink 6.1 per cent as preventive measures have slowed economic activity.
Under the baseline forecast—which assumes that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in EMDEs, that adverse global spillovers ease during the second half of the year, and that dislocations in financial markets are not long-lasting — global growth is forecast to rebound to 4.2 per cent in 2021, as advanced economies grow 3.9 per cent and EMDEs bounce back by 4.6 per cent.
However, the outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages. A downside scenario could lead the global economy to shrink by as much as 8 per cent this year, followed by a sluggish recovery in 2021 of just over 1 per cent, with output in EMDEs contracting by almost 5 per cent this year, the multilateral lending institution said.
“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said Ceyla Pazarbasioglu, World Bank Group Vice President for Equitable Growth, Finance and Institutions.
“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 added.
