The global economy and massive
stimulus measures
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| The global economy and massive stimulus measures |
The Coronavirus pandemic has caused a collapse in global economic activity. Despite unprecedented economic stimulus measures taken by governments in developed countries and many developing countries, the recession fueled by the pandemic that struck the world in 2020 is expected to be the most severe since World War II.
In our latest economic forecast released recently in the World Economic Outlook, we expect the global economy to contract by 5.2 percent this year.
Advanced economies will see their economic activity shrink by 7 percent this year due to severe disruptions to domestic demand and supply, trade, and finance. Predictions indicate that emerging market and developing countries will experience a contraction of 2.5 percent in 2020, their first contraction as a group in at least 60 years. As a result, the average per capita income is expected to decline by 3.6 percent, causing millions of people to fall into extreme poverty this year.
The recession, fueled by the pandemic that struck the world in 2020, is expected to be the most severe since World War II. If this pandemic can be adequately contained by the middle of the year in advanced economies, and later in emerging market and developing countries, we expect the global economy to recover by 4.2 percent in 2021, by 3.9 percent in advanced economies and 4.6 percent. In emerging market economies and developing countries.
However, the future outlook remains characterized by a high degree of uncertainty, as the balance of risks is heavily tilted towards deteriorating conditions, including the possibility of a prolonged pandemic, financial market turmoil, a decline in global trade, and a breakdown in supply chains.
In light of this severe public health crisis, it appears that many emerging markets and developing countries are less prepared to weather a global recession than they were during the global financial crisis. Among emerging market economies and developing countries, the most vulnerable group includes those countries that suffer from weak health systems, rely heavily on commodity exports, and have high levels of sovereign and corporate debt.
In the short term, there is an urgent need in emerging market economies and developing countries to take measures in terms of health and economic policies to mitigate the effects of the pandemic, protect the neediest and most vulnerable people, and improve countries' capacities to prevent and respond to similar events in the future. Given that the economies of emerging markets and developing countries are characterized by extreme vulnerability, it is imperative that these countries work to strengthen their public health systems, address the challenges caused by the spread of informal activities and the limited safety nets, and implement reforms aimed at achieving strong and sustainable growth when the health crisis subsides.