The global economy will shrink by 5.2 percent this year due to the massive shock of the coronavirus pandemic and the shutdown measures to contain it, the World Bank said on Monday.
The COVID-19 induced recession is the first since 1870 to be triggered solely by a pandemic, World Bank President David Malpass said in his foreword to the latest edition of the Global Economic Prospect report released on Monday.
For many emerging markets and developing countries, however, effective financial support and mitigation measures are particularly hard to achieve because a substantial share of employment is in informal sectors, Malpass said.
According to the report, economic activity among advanced economies is anticipated to shrink by seven per cent in 2020 as domestic demand and supply, trade and finance have been severely disrupted.
Emerging Markets and Developing Economies (EMDEs) are expected to shrink by 2.5 percent this year, their first contraction as a group in at least 60 years, it said.
Per capita incomes are expected to decline by 3.6 percent, which will push millions of people into extreme poverty this year, the report said.
It will hit hardest in countries where the pandemic has been the most severe and where there is a heavy reliance on global trade, tourism, commodity exports and external financing, it said.
According to World Bank President Malpass, beyond the staggering economic impacts, the pandemic will also have severe and long-lasting socio-economic impacts that may well weaken long-term growth prospects, which include the plunge in investment because of elevated uncertainty, the erosion of human capital from the legions of unemployed and the potential for ruptures of trade and supply linkages.
The World Bank report said that the global economy has experienced 14 global recessions since 1870: in 1876, 1885, 1893, 1908, 1914, 1917-21, 1930-32, 1938, 1945-46, 1975, 1982, 1991, 2009 and 2020.
The current projections suggest that the COVID-19 recession will involve a decline in global per capita Gross Domestic Product (GDP) by 6.2 percent, making it the deepest global recession since 1945-46, and more than twice as deep as the recession associated with the global financial crisis, the report said.