The global economy has entered a period of ‘subdued recovery’ with forecasts that it will expand by four per cent this year.
The World Bank made the disclosure in its Global Economic Prospects January 2021 report released late last week.
According to the report, the four per cent growth projection will be contingent on policies among other measures put in place to contain the COVID-19 pandemic coupled with investment-enhancing reforms.
World Bank Group President David Malpass said, “While the global economy appears to have entered a subdued recovery, 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.”
Malpass 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.”
However, the Bank warned that near-term outlook remains highly uncertain, and different growth outcomes are still possible.
The collapse in global economic activity in 2020 resulted in a 4.3 per cent contraction. However, the Bank revealed the decline was less severe than had been previously projected as China had a more robust recovery than anticipated, which helped to lessen the impact.
However, in emerging markets and developing economies, the fall-off in economic activity was more acute than expected.
“Financial fragilities in many of these countries, as the growth shock impacts vulnerable household and business balance sheets, will also need to be addressed,” Vice President and World Bank Group Chief Economist Carmen Reinhart said.
The Bank’s acting vice president, Ayhan Kose, said despite growth projections, recovery would take much longer in some countries, due to per capita income losses which erased a decade worth of progress.
Kose made it clear that economic recovery would be uneven with emerging economies struggling for longer.
Latin America and the Caribbean have been severely affected by the COVID-19 pandemic, from both a health and an economic perspective.
In the region, five of the 10 emerging market and developing economies had the highest COVID-19 deaths per capita.