Global Economy Record To Decline By 5.2%

An automobile factory in Germany

According to the World Economic Outlook for June 2020 of the World Bank (WB), the global economy will seriously decline at 5.2% this year due to the shock of the Covid-19 epidemic, especially as a result of measures to close the economy to prevent the spread of a pandemic.

This forecast means that this will be the worst economic recession since World War II. The World Bank report also forecasts that economic activity of developed economies will decrease by 7% by 2020 due to serious disruptions in domestic supply, demand and trade. 

Developing economies and emerging markets (EMDE) are expected to decline by 2.5% this year, the group's first decline in at least 60 years.

Per capital income is expected to fall by 3.6% and this will leave millions in extreme poverty this year. The countries with the most severe pandemics and those heavily dependent on global trade, tourism, export of goods and external finance will be hardest hit. Although the degree of disruption will vary from region to region, all EMDEs are vulnerable and this vulnerability will be even more severe due to external shocks.  

It is predicted that when the pandemic is repulsed and domestic restrictions are lifted in developed economies and then in all EMDE, the global negative impact will be reduced and the chaos in the market will be reduced. Financial school does not last long, global growth is forecast to rise back to 4.2% by 2021 when developed economies grow by 3.9% and EMDE rebounds by 4.6%. 

However, the outlook is uncertain because of the risks, including the possibility of a longer pandemic, financial volatility and global paralysis of trade and supply links. This reverse scenario could lead to a global economic decline of up to 8% this year, along with EMDE's output falling by nearly 5%, followed by a slow recovery of 1% in 2021.

The World Bank report is evidence that the world economy is still facing great challenges even when countries start to resume part of their economic activities after months of closure due to epidemics. In the US, the center of the world's Covid-19 epidemic, the economy is expected to decline by 6.1% this year. 

According to the US National Bureau of Economic Research (NBER), negative signs of the US economy have ended the longest period of growth in the country's history since 1854. Meanwhile, the growth of Eurozone is forecast to decrease 9.1%.

However, the report also stressed that Asia can play a leading role in economic recovery after the epidemic. Asian economies face disease earlier than the United States and Europe, so the theory can soon overcome the crisis due to the success of quarantine and quarantine measures. Growth in GDP of ASEAN countries is expected to reach 8% by 2021 after falling into recession in the first half of 2020. 

Meanwhile, India will grow by a negative 3.2%. in the current fiscal, the lowest level since 1979.

Experts said that in the coming months, many countries may apply additional stimulus measures to help revive the economy buckling the impact of the disease. Increasing worker benefits and capital support for businesses are short-term proposals that can be considered for implementation. 

In the long run, the gloomy growth prospects are likely to force governments to implement comprehensive reform programs to minimize the impact of the pandemic.