Global economy to plunge into worst recession since Second World War

9 Jun 20

The Covid-19 pandemic is set to push the global economy into the worst recession since the end of the Second World War, according to a report from the World Bank.

 

The report forecasts a 5.2% contraction in the global economy this year, with declines in per capita output expected in the highest proportion of countries since data began being collected in 1870.

Economic activity among advanced economies is expected to shrink by 7% in 2020 as domestic demand and supply, trade, and finance have been disrupted, the report said. And emerging markets and developing economies are expected to drop by 2.5% this year, the first contraction as a group in at least 60 years.

“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” Ceyla Pazarbasioglu, World Bank Group vice president for equitable growth, finance and institutions, 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.”

The report forecasts a 4.2% rebound in the global economy next year - albeit based on the assumption that the pandemic recedes, allowing the lifting of measures by mid-year in advanced economies and soon after in EMDEs.

A worst-case scenario could lead the global economy to shrink by as much as 8% this year, followed by a “sluggish” recovery in 2021 of just over 1% - with output in EMDEs contracting by almost 5% this year, the report warned.

“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 added.

“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.”

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