World Bank Predicts Worst Recession Since World War II, Global Economy To Shrink By 5.2%

The World Bank said the world is facing an unprecedented health and economic crisis that has spread with astonishing speed and will result in the largest shock for the global economy.

(Image: PTI)

New Delhi: The global economy will contract the most since World War II this year and emerging nations’ output will shrink for the first time in at least six decades due to the Covid-19 pandemic, reducing incomes and sending millions of people into poverty, the World Bank said on Monday.

World Bank's 'Global Economic Prospects Report' said that global economic activity will shrink by 5.2% this year, the deepest recession since a 13.8% global contraction in 1945-46 at the end of World War II.

The per-capita output will contract in more than 90 percent of countries, the biggest share since 1870. The economy will rebound in 2021, growing 4.2 percent, it said.

"The speed and depth with which it has struck, suggests the possibility of a sluggish recovery that may require policymakers to consider additional interventions," he said.

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, the president of the Washington-based multilateral lender said.

Reflecting this downward pressure on incomes, World Bank economists said they expected the number of people in extreme poverty could grow by between 70 million and 100 million this year.

World Bank economists cautioned that their forecast was based on an assumption that the worst of the coronavirus outbreak was coming to an end and economies would pick up fairly quickly once governments begin to reopen.

If there is a second wave of the virus that disrupts economic activity later this year, then growth this year will fall even farther and the rebound next year will be weaker, the World Bank analysts said.

With this, the World Bank has joined the long list of institutions expecting a negative GDP growth for India in 2020-21. Earlier on May 22, for the first time, the Reserve Bank of India (RBI) Governor, Shaktikanta Das had said, "Overall the GDP growth in 2020-21 is estimated to remain in negative territory." Also Watch| War of words between Rahul Gandhi and Rajnath Singh