But that's less than the 4.3% contraction of 2020, so investment enhancing reforms will be required
Policymakers will need to take bold action to tame the pandemic and implement investment-enhancing reforms to boost global economic recovery.
That’s according to the World Bank which sees 4% growth in 2021 following a 4.3% contraction last year.
With the huge toll on lives and economies, it will be necessary to successfully control the virus and roll out the vaccines; but a re-investment cycle which is less reliant on government debt is also required.
“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 Group President David Malpass. “To overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labor and product market flexibility, and strengthen transparency and governance.”
What if the virus isn’t contained?
The World Bank’s outlook includes a scenario where the pandemic is not brought under control and infections continue rising.
In this case, global economic growth would be limited to around 1.6%.
Growth in the US and Eurozone (by GDP) is expected to be around 3.5% with 2.5% for Japan. China is expected to outperform with 7.9%, leading emerging market and developing economies to a 5% gain.
“The pandemic has greatly exacerbated debt risks in emerging market and developing economies; weak growth prospects will likely further increase debt burdens and erode borrowers’ ability to service debt,” World Bank Acting Vice President for Equitable Growth and Financial Institutions Ayhan Kose said. “The global community needs to act rapidly and forcefully to make sure the recent debt accumulation does not end with a string of debt crises. The developing world cannot afford another lost decade.”
