The coronavirus pandemic will plunge the world into a severe recession, the deepest since World War II, shredding per capita incomes and pushing millions into poverty, the World Bank said on Monday. The Washington-based multilateral lender said India’s GDP in the current financial year is expected to contract 3.2%, downgraded from its previous forecast of 5.8% positive growth. World Bank’s report mentions, “stringent measures to restrict the spread of virus, which heavily curtail activity, will contribute to the contraction.”
The World Bank said the swift and massive shock of the coronavirus pandemic and shutdown measures to contain it will lead to a contraction of the global economy by 5.2% in 2020. Under the baseline forecast—which assumes that the pandemic will recede sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in emerging market and developing economies (EMDEs) — global growth is forecast to rebound to 4.2% in 2021, as advanced economies grow 3.9% and EMDEs bounce back by 4.6%.
- India’s GDP to contract 3.2% in FY21
- Recession due to Covid-19 would be most severe since World War II
- China is seen growing at 6.9% in 2021
- Global economy is expected to shrink 5.2% in 2020
In India, the bank forecast that Gross Domestic Product (GDP) will shrink 3.2% in the fiscal year 2020-21, when the “impact of the pandemic will largely hit”. GDP, or the value of all goods and services produced, is the broadest measure of incomes generated in an economy. The International Monetary Fund has slashed its 2010-21 growth projection for India to 1.9% from 5.8% estimated in January. Barclays said it saw 0% growth, while the World Bank cut India’s growth forecast to 1.5-2.8% from 6.1% earlier.
“Stringent measures to control the spread of the virus will heavily curtail activity, despite some support from fiscal and monetary stimulus. Spill-overs from weaker global growth and balance-sheet stress in the financial sector will also weigh on activity.”- The World Bank said in its note on India.
“Global economy to plunge into worst recession since WW-II” – World Bank
According to World Bank President Malpass, beyond the staggering economic impacts, the pandemic will also have severe and long-lasting socio-economic impacts that may well weaken long-term growth prospects — the plunge in investment because of elevated uncertainty, the erosion of human capital from the legions of unemployed and the potential for ruptures of trade and supply linkages.
He said that the speed and strength of the recovery will depend on the effectiveness of the support programmes governments and the international community put in place now; and critically on what policymakers do to respond to the new environment.
Recession due to Covid-19 would be worst since World War II
David Malpass, President, World Bank says, ‘The COVID-19 pandemic & the economic shutdown in advanced economies & other parts of the globe have disrupted billions of lives and are jeopardizing decades of development progress. Our baseline forecast envisions the deepest global recession since World War II.’ The report gives a glimmer of hope too, it mentions that the current recession is projected to last only one year and the growth rate of global per capita GDP is projected to turn positive in 2021.
The World Bank report said that the global economy has experienced 14 global recessions since 1870: in 1876, 1885, 1893, 1908, 1914, 1917-21, 1930-32, 1938, 1945-46, 1975, 1982, 1991, 2009 and 2020. The current projections suggest that the COVID-19 recession will involve a decline in global per capita Gross Domestic Product (GDP) by 6.2 per cent, making it the deepest global recession since 1945-46, and more than twice as deep as the recession associated with the global financial crisis, the report said.
The share of economies in recession will be more than 90 per cent, even higher than the proportion of about 85 per cent of countries in recession at the height of the Great Depression of 1930-32, it added at the end.