World Bank expects global economy to grow by 4% in 2021
The global economy is expected to grow 4% in 2021, provided the initial rollout of COVID-19 vaccines results in massive vaccination campaigns throughout the year. However, the recovery is likely to remain modest if policymakers do not take decisive action to stem the pandemic and implement pro-investment reforms, the World Bank said in its latest biannual edition of World Economic Outlook.
Despite the global economic rebound after a 4.3 per cent contraction registered in 2020, the pandemic has taken a heavy toll in morbidity and mortality, yet plunged many people in poverty. For many months to come, economic activity may slow down, and incomes could see drastic impacts.
The urgent priority for politicians is to control the spread of the Coronavirus and arrange massive vaccination campaigns.
To support recovery, the authorities need to promote sustainable growth and less reliance on public debt. “As the global economy appears to be heading for a timid recovery, policymakers are facing daunting challenges, such as public health, debt management, fiscal policies, central bank action, or structural reforms, says David Malpass, President of the World Bank Group.
To overcome the effects of the pandemic and face the headwinds to investment, we need to give a decisive impetus to efforts to enhance the business environment, increase labour, product market flexibility, and improve transparency and accountability governance. “
The decline in the global economy in 2020 is expected to be slightly less severe than foreseen, mainly due to less contraction in advanced economies and a stronger recovery in China. Conversely, activity has been more severely disrupted than expected in most emerging markets and developing economies. “The financial weaknesses of most of these countries will also have to be addressed, as vulnerable households and businesses are penalized by growth shocks,” said Carmen Reinhart, Vice President, and Chief Economist of the World Bank Group.
The short-term forecast is highly uncertain, yet different growth situations remain possible as detailed in the report. According to a pessimistic scenario of a continued rise in contamination and delays in the deployment of vaccines, the world economy could recover about 1.6% in 2021. Conversely, in the event of control pandemic and the acceleration of vaccination, then the growth rate could reach 5%.
The rebound started in advanced economies ended in the third quarter of 2020, held back by the upsurge in infections, growing fears in slow and challenging return, after a contraction estimated at 3.6% in 2020. The US GDP is expected to regain 3.5% in 2021. The Eurozone is expected to post growth of about 3.6% in 2021, after a drop of 7.4% in 2020. In Japan, activity is expected to grow by 2.5% in 2021, after a contraction of 5.3% in 2020.
The aggregate GDP of emerging markets and developing economies (EMDEs), including China, is expected to grow by 5% in 2021, after contracting 2.6% in 2020. China’s economy is expected to leap by 7.9% compared with 2% in 2020. Excluding China, estimates for the (EMDE) group expect an increase of 3.4% in 2021, after a decline of 5% in 2020. Activity in low-income economies should increase by 3.3% in 2021, after a decline of 0.9% in 2020.