- Collapse in global economic activity in 2020 was slightly less severe than previously projected, mainly due to shallower contractions in advanced economies and a more robust recovery in China
- But economic disruptions in other emerging market and developing economies were more acute than expected
- A downside scenario in which infections continue to rise and the rollout of a vaccine is delayed could limit the global expansion to 1.6% in 2021
- In an upside scenario with successful pandemic control and a faster vaccination process, global growth could accelerate to nearly 5%
The global economy is on track to grow by 4% in 2021, assuming vaccination for COVID-19 becomes widespread throughout the year, the World Bank Group said in its latest Global Economic Prospects released January 5.
Although the global economy is growing again after contracting 4.3% in 2020, the pandemic has caused a heavy toll of deaths and illness, plunged millions into poverty, and may depress economic activity and incomes for a prolonged period, according to the report.
It added that the collapse in global economic activity in 2020 is estimated to have been slightly less severe than previously projected, mainly due to shallower contractions in advanced economies and a more robust recovery in China.
In contrast, disruptions to activity in the majority of other emerging market and developing economies were more acute than expected.
The baseline assumption for 2021 growth is that “we will have widespread vaccine rollout” achieved in advanced economies and major emerging market and developing economies in the second half of 2021, World Bank acting vice president for equitable growth and financial institutions Ayhan Kose said.
According to the report, the near-term outlook remains “highly uncertain,” and different growth outcomes are still possible.
A downside scenario in which infections continue to rise and the rollout of a vaccine is delayed could limit the global expansion to 1.6% in 2021.
In an upside scenario with successful pandemic control and a faster vaccination process, global growth could accelerate to nearly 5%.
In advanced economies, a nascent rebound stalled in the third quarter following a resurgence of infections, pointing to “a slow and challenging recovery,” the report noted, projecting a growth of 3.3% in 2021, after a contraction of 5.4% in 2020.
US gross domestic product (GDP) is forecast to expand 3.5% in 2021, after an estimated 3.6% contraction in 2020. In the euro area, output is expected to grow 3.6% this year, following a 7.4% decline in 2020. Japan, which saw a 5.3% economic contraction in 2020, is forecast to grow by 2.5% in 2021.
Meanwhile, aggregate GDP in emerging market and developing economies is expected to grow 5% in 2021, after a contraction of 2.6% in 2020, the report showed.
China’s economy is expected to expand by 7.9% this year following 2% growth last year, according to the report. Excluding China, emerging market and developing economies are forecast to expand 3.4% in 2021, after a contraction of 5% in 2020.
Global growth is projected to moderate to 3.8% in 2022, weighed down by the pandemic’s lasting damage to potential growth, the report showed.
Photo by Jenny Kim on Unsplash
