The World Bank upbeat about 2021
The World Bank has issued early January a guarded growth forecast for the global economy this year, saying that a four per cent overall expansion was likely. However, the recovery will likely be a “subdued” one. The World Bank has indicated that although global economic output is recovering from the collapse triggered by COVID-19, it will remain below pre-pandemic trends for a prolonged period. The pandemic has exacerbated the risks associated with a decade-long wave of global debt accumulation. It is also likely to steepen the long-expected slowdown in potential growth over the next decade.
Return to growth
In a tweet, the World Bank said: “The latest #WBGEP2021 report projects the global economy will expand 4% in 2021 — marking a return to growth after the 2020 recession. But substantial risks remain, and the recovery is expected to be subdued.”
The report is welcome news following a devastating year characterized by COVID-19, which has shattered the global economy and plunged millions into poverty.
Commenting on the report, the World Bank President, David Malpass, said: “Following the devastating health and economic crisis caused by COVID-19, the global economy appears to be emerging from one of its deepest recessions and beginning a subdued recovery. Beyond the short term economic outlook, this edition of Global Economic Prospects makes clear; policymakers face formidable challenges — in public health, debt management, budget policies, central banking and structural reforms — as they try to ensure that this still-fragile global recovery gains traction and sets a foundation for robust growth and development in the longer run.”
“While the global economy appears to have entered a subdued recovery, policymakers face serious challenges — in public health, debt management, budget policies, central banking and structural reforms — as they try to ensure that this still-fragile global recovery gains traction and sets a foundation for robust growth,” said World Bank Group President. He further added: “To overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labour and product market flexibility, and strengthen transparency and governance.”
This year, China’s economy is expected to expand by 7.9%, following 2% growth last year.
Excluding China, the emerging market and developing economies are forecast to expand by 3.4% in 2021 after a contraction of 5% in 2020. Among low-income economies, activity is projected to increase by 3.3% in 2021, after a contraction of 0.9% in 2020.
The World Bank’s optimistic projection did not come without warning. The global economy could be heading for a decade of “growth disappointments unless policymakers put in place comprehensive reforms to improve the fundamental drivers of equitable and sustainable economic growth.”
World Bank Group President David Malpass notes that “Making the right investments now is vital both to support the recovery when it is urgently needed and foster resilience. Our response to the pandemic crisis today will shape our common future for years to come. We should seize the opportunity to lay the foundations for a durable, equitable, and sustainable global economy.”
While 2020 had been an extremely challenging year, hopes are high that the global economy will pick up, particularly with the vaccine rollout and the post-pandemic measures being envisaged by various governments, including the emerging markets.