More than one million lives have been lost to COVID-19 since the start of the year and the toll continues to rise. Many more have suffered serious illness. Close to 90 million people are expected to fall into extreme deprivation this year.
These are difficult times, yet there are some reasons to be hopeful. Testing has been ramped up, treatments are improving, and vaccine trials have proceeded at an unprecedented pace, with some now in the final stage of testing. International solidarity has strengthened along some dimensions, from rolling back trade restrictions on medical equipment to enhancing financial assistance for vulnerable countries. And recent data suggest that many economies have started to recover at a faster pace than anticipated after reopening from the Great Lockdown.
We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast. The revision is driven by second quarter GDP outturns in large advanced economies, which were not as negative as we had projected; China’s return to growth, which was stronger than expected; and signs of a more rapid recovery in the third quarter.
Outturns would have been much weaker if it weren’t for sizable, swift, and unprecedented fiscal, monetary, and regulatory responses that maintained disposable income for households, protected cash flow for firms, and supported credit provision. Collectively these actions have so far prevented a recurrence of the financial catastrophe of 2008-09.
The global economy is climbing out from the depths to which it had plummeted during the Great Lockdown in April. But with the COVID-19 pandemic continuing to spread, many countries have slowed reopening and some are reinstating partial lockdowns to protect susceptible populations. While recovery in China has been faster than expected, the global economy’s long ascent back to pre-pandemic levels of activity remains prone to setbacks.
Global Growth Outlook and Risks
Near-term outlook. Global growth is projected at −4.4 percent in 2020, a less severe contraction than forecast in the June 2020 World Economic Outlook (WEO) Update. The revision reflects better-thananticipated second quarter GDP outturns, mostly in advanced economies, where activity began to improve sooner than expected after lockdowns were scaled back in May and June, as well as indicators of a stronger recovery in the third quarter.
Global growth is projected at 5.2 percent in 2021, a little lower than in the June 2020 WEO Update, reflecting the more moderate downturn projected for 2020 and consistent with expectations of persistent social distancing. Following the contraction in 2020 and recovery in 2021, the level of global GDP in 2021 is expected to be a modest 0.6 percent above that of 2019. The growth projections imply wide negative output gaps and elevated unemployment rates this year and in 2021 across both advanced and emerging market economies.
