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World Bank sees global economy expand 4% in 2021 backed by COVID vaccine deployment
By TII News Services
Jan 06, 2021 , Washington


WITH the COVID-19 vaccine rollout becoming more widespread in 2021, the World Bank expects the global economy to expand 4% after seeing a 4.3% contraction during the pandemic. However, the recovery may falter and be limited to just 1.6% if the cases continue to rise and there are delays in vaccine distribution.

Advising policy makers to move decisively, the World Bank in its January 2021 Global Economic Prospects says the economic upturn will still remain more than 5% below the pre-pandemic trend.

"While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges-in public health, debt management, budget policies, central banking and structural reforms-as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth," said World Bank President Mr David Malpass.

More than 86 million people have been infected by the novel coronavirus and nearly 1.86 million have died since the disease was first reported in China in December 2019. The pandemic has caused a heavy toll of deaths and illness, plunged millions into poverty, and may depress economic activity and incomes for a prolonged period.

"To overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labour and product market flexibility, and strengthen transparency and governance," said Mr Malpass.

Top near-term policy priorities are controlling the spread of COVID-19 and ensuring rapid and widespread vaccine deployment. To support economic recovery, authorities also need to facilitate a re-investment cycle aimed at sustainable growth that is less dependent on government debt, the report said.

The collapse in global economic activity in 2020 is estimated to have been slightly less severe than previously projected, mainly due to shallower contractions in advanced economies and a more robust recovery in China.

In contrast, disruptions to activity in the majority of other emerging market and developing economies were more acute than expected, the Bank said.

"Financial fragilities in many of these countries, as the growth shock impacts vulnerable household and business balance sheets, will also need to be addressed," Vice President and World Bank Group Chief Economist Ms Carmen Reinhart said.

The near-term outlook remains highly uncertain, and different growth outcomes are still possible if infections continue to increase, as a section of the report details.

The pandemic has also affected per capita incomes in 90% of emerging markets and developing economies, with millions tipping into poverty as investor confidence reduced and unemployment peaked. "People at the bottom of the income scale were hardest hit by the shutdowns and recession and will most likely be the slowest to regain jobs and get vaccinations," Mr Malpass said in a media briefing.

In the positive scenario, with successful pandemic control and faster vaccination process, the weighed down global growth may strengthen over the forecast horizon as confidence, demand and trade gradually improve.

For emerging markets and developing economies, including China, GDP is expected to grow 5% in 2021 after a contraction of 2.6% in 2020. China's economy is expected to expand by 7.9% this year following a 2% growth last year.

Aggregate gross domestic product (GDP) in the US is forecast to expand 3.5% in 2021 after an estimated 3.6% contraction in 2020, while the Euro area is anticipated to grow 3.6% following a 7.4% decline last year.

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