World economy to shrink by 5.2% this year: World Bank

Owing to the deadly impact of the coronavirus pandemic that brought global economic activities to a near halt, the world economy will slip into a deep recession and shrink by 5.2 per cent in 2020, the World Bank has said.

In its just-released edition of the Global Economic Prospect, it said that millions of people will be pushed into poverty. This could be the worst year for global economy since World War II, it added.

World Bank President David Malpass, in his foreword to the report, said that this imminent recession is the first since 1870 which has been solely driven by a pandemic.

“The speed and depth with which it has struck suggests the possibility of a sluggish recovery that may require policymakers to consider additional interventions,” Malpass said.

The World Bank projected India’s gross domestic product (GDP) growth to shrink by 3.2 per cent in the financial year 2020-21. “Stringent measures to control the spread of the virus will heavily curtail activity, despite some support from fiscal and monetary stimulus. Spillovers from weaker global growth and balance-sheet stress in the financial sector will also weigh on activity,” the multilateral agency in its observations on India said.

The World Bank also said that per capita incomes—the average income of a person in a country—will decline by 3.6 per cent, “which will tip millions of people into extreme poverty this year.”

It also said that the countries relying heavily on global trade, tourism, and exports will be the worst impacted.

The report noted that economic activities in advanced economies could shrink by 7 per cent in 2020 as domestic demand and supply, trade and finance have been severely disrupted.

The report further said that the emerging markets and developing economies (EMDEs) could shrink by 2.5 per cent this year, their first contraction as a group in at least 60 years.

Malpass said recovery will largely depend on the support programmes of the individual governments besides the international community and the response of policymakers in the new environment.

In its previous Global Economic Prospects released in January, the World Bank had projected a 2.5 per cent growth for the global economy this year.

The bank noted that world has gone through recessions 14 times since 1870—in 1876, 1885, 1893, 1908, 1914, 1917-21, 1930-32, 1938, 1945-46, 1975, 1982, 1991, 2009 and 2020..