The global economy, which has plunged into a severe contraction, will shrink by 5.2 per cent this year due to the massive shock of the coronavirus pandemic and the shutdown measures to contain it, 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 foreword to the latest edition of the Global Economic Prospect report released on Monday.
"The speed and depth with which it has struck, suggests the possibility of a sluggish recovery that may require policymakers to consider additional interventions," he said.
For many emerging markets and developing countries, however, effective financial support and mitigation measures are particularly hard to achieve because a substantial share of employment is in informal sectors, the president of the Washington-based multilateral lender said.
According to the report, economic activity among advanced economies is anticipated to shrink by seven per cent in 2020 as domestic demand and supply, trade and finance have been severely disrupted.
Emerging Markets and Developing Economies (EMDEs) are expected to shrink by 2.5 per cent this year, their first contraction as a group in at least 60 years, it said. Per capita incomes are expected to decline by 3.6 per cent, which will tip millions of people into extreme poverty this year, according to the report.
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, it said.
While the magnitude of the 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 bank said.
"This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges," World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu said.
"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," he said.
World Bank Prospects Group Director Ayhan Kose said the COVID-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since the World War-II 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," he said.
According to World Bank President Malpass, beyond the staggering economic impacts, the pandemic will also have severe and long-lasting socio-economic impacts that may well weaken long-term growth prospects--the plunge in investment because of elevated uncertainty, the erosion of human capital from the legions of unemployed and the potential for ruptures of trade and supply linkages.
He said that the speed and strength of the recovery will depend on the effectiveness of the support programmes governments and the international community put in place now; and critically on what policymakers do to respond to the new environment.
The World Bank report said the global economy has experienced 14 global recessions since 1870: in 1876, 1885, 1893, 1908, 1914, 1917-21, 1930-32, 1938, 1945-46, 1975, 1982, 1991, 2009 and 2020.
The current projections suggest that the COVID-19 recession will involve a decline in global per capita Gross Domestic Product (GDP) by 6.2 per cent, making it 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 suggest that in 2020, the highest share of economies will experience contractions in annual per capita GDP since 1870, it said.
The share of economies in recession will be more than 90 per cent, even higher than the proportion of about 85 per cent of countries in recession at the height of the Great Depression of 1930-32, it added.
According to Johns Hopkins Coronavirus Resource Center, the coronavirus has infected over 70,00,000 people and killed more than 4,00,000 across the world. The US is the worst affected country with over 1.9 million cases and more than 1,10,000 deaths.