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Global Economic Prospects

Pandemic, Recession: The Global Economy in Crisis

Global Outlook

COVID-19 has delivered an enormous global shock, leading to steep recessions in many countries. The baseline forecast envisions a 5.2 percent contraction in global GDP in 2020—the deepest global recession in decades. Per capita incomes in most emerging and developing economies will shrink this year. The pandemic highlights the urgent need for policy action to cushion its consequences, protect vulnerable populations, and improve countries’ capacity to cope with similar future events. It is also critical to address the challenges posed by informality and limited safety nets and undertake reforms that enable strong and sustainable growth.

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Regional Outlooks

The rapid rise of COVID-19 cases, together with the wide range of measures to slow the spread of the virus, has slowed economic activity precipitously in many EMDEs. Growth forecasts for all regions have been severely downgraded. Many countries have avoided more adverse outcomes through sizable fiscal and monetary policy support. Despite these measures, per capita incomes in all EMDE regions are expected to contract in 2020, likely causing many millions to fall back into poverty.

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    East Asia and Pacific

    Growth in the region is projected to fall to 0.5% in 2020, the lowest rate since 1967, reflecting disruptions caused by the pandemic. China is expected to slow to 1% this year and rebound to 6.9 percent in 2021 as activity gradually normalizes there and as lockdowns are lifted around the world. Economic activity in the rest of East Asia and Pacific is forecast to contract by 1.2 percent in 2020 before rebounding to 5.4 percent in 2021. Among major economies of the region, Malaysia (-3.1%), the Philippines (-1.9%), and Thailand (-5%) are forecast to experience the biggest contractions this year.
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    Europe and Central Asia

    The regional economy is forecast to contract by 4.7%, with recessions in nearly all countries. The Russian Federation’s economy is forecast to contract by 6.0% this year, reflecting a jump in COVID-19 cases and the collapse in oil prices. Turkey’s economy is anticipated to shrink by 3.8% this year, subject to a drop in investment and shutdowns. Economic activity is expected to contract in every sub-region in 2020 as outbreaks of the virus constrain private consumption and investment: Central Europe by 5%; Western Balkans by 3.2%; South Caucasus by 3.1%; Eastern Europe by 3.6%; and Central Asia by 1.7%.
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    Latin America and the Caribbean

    The shocks stemming from the pandemic will cause regional economic activity to plunge by 7.2% in 2020. Brazil’s economy is projected to shrink by 8% due to lockdowns, plunging investment, supply chain disruptions, and soft global commodity prices. Mexico’s economy, hit by tighter financing conditions, the plunge in oil prices, the halt in tourism, and mobility restrictions, is on track to contract by 7.5%. Economic activity in Argentina is forecast to decline by 7.3%, reflecting stringent mitigation measures, lower external demand, and the impacts of uncertainty related to ongoing debt negotiations. Central America’s economy is projected to shrink by 3.6% and the Caribbean is anticipated to contract by 1.8%, and by 3.1% excluding Guyana, where the offshore oil industry is developing rapidly.
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    Middle East and North Africa

    Economic activity in the Middle East and North Africa is forecast to contract 4.2% as a result of the pandemic and oil market developments. Iran is expected to contract 5.3%, the third year of contraction in a row. In many oil exporters, growth will be significantly constrained by policy cuts in oil production. In Gulf Cooperation Council (GCC) countries (-4.1%), low oil prices and uncertainty related to outbreaks of the virus will further weigh on non-oil activity. Economic activity among oil importers is expected to contract by 0.8% in 2020, as tourism and exports decline.
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    South Asia

    GDP in the region is projected to contract by 2.7% in 2020 as pandemic mitigation measures hinder consumption and services activity and uncertainty about the course of the pandemic chills private investment. In India, growth is estimated to have slowed to 4.2% in FY 2019/20, which ended in March 2020. Output is projected to contract by 3.2% in FY 2020/21, when the impact of the pandemic will largely hit. Pakistan (-2.6% in FY 2019/20) and Afghanistan (-5.5%) are both projected to experience contractions, as mitigation measures are anticipated to weigh heavily on activity. Growth in Bangladesh (1.6% in FY 2019/20) and Nepal (1.8% in FY 2019/20) is expected to decelerate markedly due to pandemic-related disruptions including mitigation measures and sharp falls in exports and remittance inflows.
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    Sub-Saharan Africa

    Economic activity in the region is on course to contract by 2.8% in 2020, the deepest on record. The economy of Nigeria is expected to shrink by 3.2% this year, given the collapse in prices for oil. South Africa’s output is forecast to contract 7.1% this year, the deepest contraction in a century, as stringent but necessary containment measures curtail economic activity. Economic activity among commodity importing economies is anticipated to shrink this year despite lower oil prices, as international travel restrictions weigh on tourist visits. Industrial commodity exporters’ GDP is similarly anticipated to contract in 2020 as domestic disruptions are compounded by low prices for oil and metals. Agricultural commodity exporters are also expected to experience a collapse in economic activity this year as foreign direct investment and tighter financial conditions delay investment.

Five Topical Issues

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Lasting Scars of the COVID-19 Pandemic

The COVID-19 pandemic has struck a devastating blow to an already-fragile global economy. Lockdowns and other restrictions needed to address the public health crisis, together with spontaneous reductions in economic activity by many consumers and producers, constitute an unprecedented combination of adverse shocks that is causing deep recessions in many advanced economies and emerging market and developing economies (EMDEs). Those EMDEs that have weak health systems; those that rely heavily on global trade, tourism, or remittances from abroad; ... See More

Five Topical Issues

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Adding Fuel to the Fire: Cheap Oil in the Pandemic

The outbreak of COVID-19 and the wide-ranging measures needed to slow its advance have precipitated an unprecedented collapse in oil demand, a surge in oil inventories, and, in March, the steepest one-month decline in oil prices on record. In the context of the current restrictions on a broad swath of economic activity, low oil prices are unlikely to do much to buffer the effects of the pandemic, but they may provide some initial support for a recovery once these restrictions begin to be lifted. Like other countries, energy-exporting emerging m... See More

Five Topical Issues

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How Deep will the COVID-19 Recession Be?

Current projections suggest that the COVID-19 global recession will be the deepest since the end of World War II, with the largest fraction of economies experiencing declines in per capita output since 1870. Output of emerging market and developing economies (EMDEs) is expected to contract in 2020 for the first time in at least 60 years. The current global recession is also unique in that global growth forecasts have been revised down more steeply and rapidly than in any other recessions since at least 1990. The gradual nature of forecast downg... See More

Five Topical Issues

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How Does Informality Aggravate the Impact of COVID-19?

COVID-19 will take an especially heavy humanitarian and economic toll on emerging markets and developing economies (EMDEs) with large informal sectors. Participants in the informal sector—workers and small enterprises—are often not registered with the government and hence have no access to government benefits. Informality is associated with underdevelopment in a wide range of areas, such as widespread poverty, lack of access to financial systems, deficient public health and medical resources, and weak social safety nets. These vulnerabilities h... See More

Five Topical Issues

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Regional Macroeconomic Implications of COVID-19

The rapid rise of COVID-19 cases, together with the wide range of measures to slow the spread of the virus, has slowed economic activity precipitously in many emerging market and developing economies (EMDEs). Economic disruptions are likely to be more severe and protracted in those countries with larger domestic outbreaks, greater exposure to international spillovers (particularly through exposure to global commodity and financial markets, global value chains, and tourism), and larger pre-existing challenges such as informality. Growth forecast... See More

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