The World Bank Group has said that the global economy is expected to expand 5.6% in 2021, the fastest post-recession pace in 80 years, largely on strong rebounds from a few major economies in its June 2021 Global Economic Prospects.
The multilateral institution noted however that many emerging market and developing economies continue to struggle with the COVID-19 pandemic and its aftermath, despite the recovery, adding, global output will be about 2% below pre-pandemic projections by the end of this year.
According to the World Bank Group President David Malpass , “Per capita income losses will not be unwound by 2022 for about two-thirds of emerging market and developing economies. Among low-income economies, where vaccination has lagged, the effects of the pandemic have reversed poverty reduction gains and aggravated insecurity and other long-standing challenges. While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world.”.
He added: “Globally coordinated efforts are essential to accelerate vaccine distribution and debt relief, particularly for low-income countries. As the health crisis eases, policymakers will need to address the pandemic’s lasting effects and take steps to spur green, resilient, and inclusive growth while safeguarding macroeconomic stability.”
The World Bank further stated that the 5.6 per cent expected growth, the fastest post-recession pace in 80 years, was an upward review from the 4.1 per cent forecast in January.
It said in spite of the recovery, global output will be about two per cent below pre-pandemic projections by the end of the year. Also, per capita income losses would not be unwound by 2022 for about two-thirds of emerging market and developing economies.
According to the Bank, among low-income economies, where vaccination had lagged, the effects of the pandemic had reversed poverty reduction gains and aggravated insecurity and other long-standing challenges. Among major economies, the United States of America’s growth is projected to reach 6.8 per cent, reflecting large-scale fiscal support and the easing of pandemic restrictions, while growth in other advanced economies is also firming, but to a lesser extent.
It further added: “Among emerging markets and developing economies, China is anticipated to rebound to 8.5 per cent this year, reflecting the release of pent-up demand. Emerging market and developing economies as a group are forecast to expand by six per cent this year, supported by higher demand and elevated commodity prices.”
The recoverye in many countries, it added, was being held back by a resurgence of COVID-19 cases and lagging vaccination progress, as well as the withdrawal of policy support in some instances. It said that excluding China, the rebound in this group of countries was anticipated to be a more modest 4.4 per cent, while the recovery among emerging market and developing economies was forecast to moderate to 4.7 per cent in 2022.
Even so, gains in this group of economies are not sufficient to recoup losses experienced during the 2020 recession, and output in 2022 was expected to be 4.1 per cent below pre-pandemic projections,” it said.
It added that per capita income in many emerging market and developing economies was also expected to remain below pre-pandemic levels and losses were anticipated to worsen deprivations associated with health, education and living standards.
Major drivers of growth had been expected to lose momentum even before the COVID-19 crisis, and the trend is likely to be amplified by the scarring effects of the pandemic. “Growth in low-income economies this year is anticipated to be the slowest in the past 20 years other than 2020, partly reflecting the very slow pace of vaccination. Low-income economies are forecast to expand by 2.9 per cent in 2021 before picking up to 4.7 per cent in 2022. The group’s output level in 2022 is projected to be 4.9 per cent lower than pre-pandemic projections.” For Sub-Saharan Africa, regional activity is expected to expand a modest 2.8 per cent in 2021 and 3.3 per cent in 2022.
According to the report, positive spillovers from strengthening global activity, better international control of COVID-19 and strong domestic activity in agricultural commodity exporters are expected to gradually help lift growth. “Nonetheless, the recovery is envisioned to remain fragile, given the legacies of the pandemic and the slow pace of vaccinations in the region. In a region where tens of millions more people are estimated to have slipped into extreme poverty because of COVID-19. Per capita income growth is set to remain feeble, averaging 0.4 per cent a year in 2021-22, reversing only a small part of last year’s loss. Risks to the outlook are tilted to the downside, and include lingering procurement and logistical impediments to vaccinations, further increases in food prices that could worsen food insecurity, rising internal tensions and conflicts, and deeper-than expected long-term damage from the pandemic.”
Furthermore it said that in Nigeria, growth is projected to resume at a modest rate of 1.8 per cent in 2021 and edge up to 2.1 per cent in 2022, assuming higher oil prices, a gradual implementation of structural reforms in the oil sector and a market-based flexible exchange rate management. “The expected pickup is also predicated on continued vaccinations in the second half of 2021 and a gradual relaxation of COVID-related restrictions that will allow activity to improve. Nonetheless, output in Nigeria is not expected to return to its 2019 level until end-2022.” David Malpass, the World Bank Group President, said that while there were welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world. He said that globally coordinated efforts were essential to accelerate vaccine distribution and debt relief, particularly for low-income countries.
“As the health crisis eases, policymakers will need to address the pandemic’s lasting effects and take steps to spur green, resilient, and inclusive growth while safeguarding macroeconomic stability.”
The report said that lowering trade costs such as cumbersome logistics and border procedures could help bolster the recovery among emerging market and developing economies by facilitating trade. Indermit Gill, World Bank Group Vice President for Equitable Growth and Financial Institutions, said that linkages through trade and global value chains had been a vital engine of economic advancement for developing economies and lifted many people out of poverty. He said that however, at current trends, global trade growth was set to slow down over the next decade.
“As developing economies recover from the COVID-19 pandemic, cutting trade costs can create an environment conducive to re-engaging in global supply chains and reigniting trade growth.” It also said that rising food prices and accelerating aggregate inflation may also compound challenges associated with food insecurity in low-income countries. However, policymakers in these countries should ensure that rising inflation rates do not lead to a de-anchoring of inflation expectations and resist subsidies or price controls to avoid putting upward pressure on global food prices. Instead, policies focusing on scaling up social safety net programs, improving logistics and climate resilience of local food supply would be more helpful, the Multilateral institute stressed.