World Bank Slashes 2021 Global Economic Growth Forecast To 4%

The World Bank on Tuesday downgraded its outlook for the global economy and warned that the situation could deteriorate if Covid-19 infections accelerate or the vaccine rollout is delayed.

The bank warned that the coronavirus pandemic has worsened the risks surrounding the rising debt profile in developing nations, and it will take a global effort to avoid a new crisis in those economies.

After shrinking 4.3 per cent in 2020, the world economy is projected to grow by 4.0 per cent this year, two-tenths lower than previously forecast, as more than half of countries were downgraded in the semi-annual Global Economic Prospects report.

The bank said that China was a bright spot with a surprisingly fast recovery in 2020, but advanced countries which did better last year will fare worse in 2021.

The report warns that the outlook remains “highly uncertain,” and GDP growth could be as low as 1.6 per cent this year if the downside risks materialise.

With millions driven into poverty by the coronavirus recession, the World Bank said countries will need to find a way to move beyond direct aid and reignite investment to stimulate growth.

The World Bank President David Malpass, while speaking on the report noted that policymakers face “formidable challenges as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth,”

He said the expectation for a subdued recovery assumes that vaccine rollout becomes widespread and the economic reopening continues.

But even if the pace of growth holds steady, he said the global GDP in 2022 will be 4.4 per cent below pre-pandemic levels.

The bank stated that there is need for more focus on policies to boost investment so as to counter “the pandemic’s lasting scars.”

Malpass said this would include phasing out fossil fuel subsidies and providing incentives for green technologies.