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Worst global recession since Second World War
Published on: 2020-06-10
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A man looks at signs of a closed store due to COVID 19

A man looks at signs of a closed store due to COVID-19

The World Bank Group has forecast that the global economy will this year experience its worst recession since the Second World War and is expected to contract by 5.2 per cent.

world 01According to the World Bank Group’s June 2020 Global Economic Prospects, the swift and massive shock of the coronavirus pandemic and shutdown measures to contain it have plunged the global economy into a severe contraction.
 

 

Among the effects of the recession is economic activity among advanced economies is anticipated to shrink by 7 per cent in 2020 as domestic demand and supply, trade, and finance have been severely disrupted.

world 02Emerging market and developing economies are expected to shrink by 2.5 per cent this year, their first contraction as a group in at least sixty years which risks tipping millions of people into extreme poverty this year.
 

The World Bank noted that the blow could be hardest hitting in countries where there is heavy reliance on global trade, tourism, commodity exports, and external financing.

Closed stores is seen through a shutter at the Ameya Yokocho market in Tokyo JapanClosed stores is seen through a shutter at the Ameya Yokocho market in Tokyo, Japan

“While the magnitude of disruption will vary from region to region, all emerging market and developing economies have vulnerabilities that are magnified by external shocks. Moreover, interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development,” the World Bank noted.
 

“The Covid-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since the Second World War and the first output contraction in emerging and developing economies in at least the past six decades. The current episode has already seen by far the fastest and steepest downgrades in global growth forecasts on record. If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity,” said World Bank Prospects Group Director Ayhan Kose.

An employee wearing a face mask works on a production line manufacturing socks for export at a factory in Huzhous Deqing countAn employee wearing a face mask works on a production line manufacturing socks for export at a factory in Huzhou’s Deqing count

The baseline forecast is partly built on an assumption that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and shortly after in emerging economies.
 

The optimism in the forecast is that effects on financial markets are not long-lasting with global growth is forecast to rebound to 4.2 per cent in 2021.
 

The World Bank recommended that emerging markets and developing economies with available fiscal space and affordable financing conditions could consider additional stimulus if the effects of the pandemic persist.

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