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Pandemic drives broadest economic collapse in 150 years: World Bank
WASHINGTON, June 8, 2020 (BSS/AFP) – The coronavirus pandemic
inflicted a “swift and massive shock” that has caused the broadest
collapse of the global economy since 1870 despite unprecedented
government support, the World Bank said Monday.
The world economy is expected to contract by 5.2 percent this year
— the worst recession in 80 years — but the sheer number of
countries suffering economic losses means the scale of the downturn is
worse than any recession in 150 years, the World Bank said in its
latest Global Economic Prospects report.
“This is a deeply sobering outlook, with the crisis likely to leave
long-lasting scars and pose major global challenges,” said World Bank
Group Vice President for Equitable Growth, Finance and Institutions
Ceyla Pazarbasioglu.
The depth of the crisis will drive 70 to 100 people into extreme
poverty — worse than the prior estimate of 60 million, she told
reporters.
And while the Washington-based development lender projects a
rebound for 2021, there is a risk a second wave of outbreaks could
undermine the recovery and turn the economic crisis into a financial
one that will see a “wave of defaults.”
Economists have been struggling to measure the impact of the crisis
they have likened to a global natural disaster, but the sheer size of
the impact across so many sectors and countries has made it hard to
calculate, and made predictions about any recovery highly uncertain.
Under the worst-case scenario, the global recession could mean a
contraction of eight percent, according to the report.
But Pazarbasioglu cautioned: “Given this uncertainty, further
downgrades to the outlook are very likely.”
– China still growing, barely –
Although China is nearly alone in seeing modest growth this year,
the depth of the slowdown in the world’s second-largest economy will
hinder recovery prospects in developing nations, especially commodity
exporters, the World Bank warned.
While China will see GDP rise just one percent, the World Bank
said, the rest of the forecasts are grim: US -6.1 percent, eurozone
-9.1 percent, Japan -6.1 percent, Brazil -8 percent, Mexico -7.5
percent and India -3.2 percent.
And things could get worse, meaning the forecasts will be revised
even lower, the bank warned.
Though dramatic, the current forecast falls short of the Great
Depression, which saw a global contraction of 14.5 percent from 1930
to 1932, while the post-war downturn in 1945-1946 was 13.8 percent,
according to the World Bank.
Still, amid the still unfolding pandemic there remain some
“exceptionally high” risks to the outlook, particularly if the of the
disease lingers or rebounds, causing authorities to reimpose
restrictions that could make the downturn as bad as eight percent.
“Disruptions to activity would weaken businesses’ ability to remain
in operation and service their debt,” the report cautioned.
That, in turn, could raise interest rates for higher-risk
borrowers. “With debt levels already at historic highs, this could
lead to cascading defaults and financial crises across many
economies,” it said.
But even if the 4.2 percent global recovery projected for 2021
materializes, “in many countries, deep recessions triggered by
COVID-19 will likely weigh on potential output for years to come.”
BSS/AFP/MRU/2201hrs