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Economy & Politics
Global Economy to grow by 4% in 2021 – World Bank
The World Bank report has stated that the global economy would expand by 4% in 2021.
The global economy is most likely to expand by 4% in 2021, with the immediate policy priorities focused on controlling the spread of coronavirus and ensuring rapid and widespread vaccine deployment as well as strategic investments.
This was disclosed in the Global Economic Prospects January 2021 report released by the World Bank.
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According to the report…
- The global economy is expected to expand 4% in 2021, assuming an initial COVID-19 vaccine rollout becomes widespread throughout the year.
- A recovery, however, will likely be subdued, unless policymakers move decisively to tame the pandemic and implement investment-enhancing reforms.
- Although the global economy is growing again after a 4.3% contraction in 2020, the pandemic has caused a heavy toll of deaths and illness, plunged millions into poverty, and may depress economic activity and incomes for a prolonged period.
- Top near-term policy priorities are controlling the spread of COVID-19 and ensuring rapid and widespread vaccine deployment. To support economic recovery, authorities also need to facilitate a re-investment cycle aimed at sustainable growth that is less dependent on government debt.
READ: $70 billion per annum will be needed to tackle pandemic induced poverty – World Bank
What they are saying
According to World Bank Group President, David Malpass,
- “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.
- “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.”
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According to Vice President and World Bank Group Chief Economist, Carmen Reinhart
- “Financial fragilities in many of these countries, as the growth shock impacts vulnerable household and business balance sheets, will also need to be addressed.”
READ: Private sector to drive global economic recovery in 2021 – IFC Boss
According to Ayhan Kose, World Bank Acting Vice President for Equitable Growth and Financial Institutions:
- “The pandemic has greatly exacerbated debt risks in emerging market and developing economies; weak growth prospects will likely further increase debt burdens and erode borrowers’ ability to service debt.
- “The global community needs to act rapidly and forcefully to make sure the recent debt accumulation does not end with a string of debt crises. The developing world cannot afford another lost decade.”
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What you should know
- In Sub-Saharan Africa, economic activity is quite on course and is expected to rise by 2.7% in 2021.
- With the rise in infections and delay in the rollout of the vaccines, the global economic expansion could be limited to rise only 1.6% in 2021.
- But with successful pandemic control and a faster vaccination process, global growth could accelerate to nearly 5%.
- With the resurgence of the infections in some advanced economies, their recoveries might be slow and challenging. For example, U.S. GDP is forecast to expand by 3.5% in 2021, after an estimated 3.6% contraction in 2020. Japan is expected to grow by 2.5% in 2021 after shrinkage by 5.3% in 2020. Europe is to grow by 3.6% in 2021, following a dip of 7.4% in 2020. China’s economy is expected to expand by 7.9% in 2021 following 2% growth in 2020.
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Business
IMF lifts 2021 global GDP growth to 6%
The group also warned that economic recoveries are diverging dangerously across and within countries.
The International Monetary Fund has lifted its global growth outlook to 6% in 2021 (0.5% point upgrade) and 4.4% in 2022 (0.2 percentage point upgrade), after an estimated historic contraction of -3.3% in 2020 due to the effects of the COVID-19 pandemic. This disclosure was made on the organisation’s website on Tuesday.
The group also warned that economic recoveries are diverging dangerously across and within countries, as economies with slower vaccine rollout, more limited policy support, and more reliance on tourism do less well.
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What the IMF is saying
“The upgrades in global growth for 2021 and 2022 are mainly due to upgrades for advanced economies, particularly to a sizeable upgrade for the United States (1.3 percentage points) that is expected to grow at 6.4 percent this year.
This makes the United States the only large economy projected to surpass the level of GDP it was forecast to have in 2022 in the absence of this pandemic.
China is projected to grow this year at 8.4 percent. While China’s economy had already returned to pre-pandemic GDP in 2020, many other countries are not expected to do so until 2023.”
READ: Nigeria needs structural and monetary policy reforms to unlock potential – IMF
On divergent recoveries
The IMF stated that divergent recovery paths are likely to create wider gaps in living standards across countries compared to pre-pandemic expectations.
“The average annual loss in per capita GDP over 2020–24, relative to pre-pandemic forecasts, is projected to be 5.7 percent in low-income countries and 4.7 percent in emerging markets, while in advanced economies the losses are expected to be smaller at 2.3 percent,” they said.
“Faster progress with vaccinations can uplift the forecast, while a more prolonged pandemic with virus variants that evade vaccines can lead to a sharp downgrade. Multispeed recoveries could pose financial risks if interest rates in the United States rise further in unexpected ways.“
For Africa, IMF forecasts economic growth of 3.4% in 2021 and 4% by 2022, Nigeria is expected to grow by 2.5% in 2021 and 2.3% by 2022, while South Africa is projected to hit growths of 3.1% and 2.0% for the respective years in focus.
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In case you missed it
The International Monetary Fund (IMF) identified some factors that hamper the economic recovery of low-income countries from the devastating impact of the coronavirus pandemic, factors including access to vaccines, limited policy space to respond to the crisis, the lack of means for extra spending, pre-existing vulnerabilities such as high levels of public debt in many low-income countries and sometimes weak, negative, total factor productivity performance in some low-income countries. These factors continue to act as a drag on growth.
