Most countries set for recession in 2020
Tens of millions of people face the grim prospect of being plunged into extreme poverty, as the COVID-19 pandemic makes recession an inevitability for most countries.
According to the World Bank’s June 2020 Global Economic Prospects report, global GDP is expected to contact 5.2% in 2020, with per capital income contracting in the largest fraction of countries globally since 1870.
Advanced economies are projected to shrink 7%, creating a spillover effect that is expected to create a 2.5% contraction for emerging market and developing economies.
Ceyla Pazarbasioglu, World Bank Group Vice-President for Equitable Growth, Finance and Institutions, said, “This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges.”
On a regional basis, East Asia and the Pacific will grow by 0.5%, South Asia will contract by 2.7%, Sub-Saharan Africa by 2.8%, Middle East and North Africa by 4.2%, Europe and Central Asia by 4.7%, and Latin America by 7.2%.
And it could worse before it gets better. Should COVID-19 outbreaks persist, restrictions on movement be extended or reintroduced, and disruptions to economic activity be prolonged, a deeper recession could be created, warned the World Bank.
Businesses might find it hard to service debt, heightened risk aversion could lead to climbing borrowing costs, and bankruptcies and defaults could result in financial crises in many countries. Under this downside scenario, global growth could shrink by almost 8% in 2020.
To mitigate the effects of COVID-19, the World Bank advised policymakers to put into place policies to rebuild both in the short and long-term, including strengthening health services and putting in place targeted stimulus measures to help reignite growth.