MNI POLICY: World Bank Says 2020 Global Output to Shrink 5.2%

By Evan Ryser

     WASHINGTON (MNI) - The coronavirus will cause global economic output to

contract by 5.2% in 2020, the World Bank said Monday, warning of the deepest

global contraction since the end of World War II and the largest fraction of

economies experiencing declines in per capita output since 1870. 

     Emerging market and developing economies are expected to shrink by 2.5% in

2020, their first contraction as a group in at least sixty years. Per capita

incomes are expected to decline by 3.6%, which will tip millions of people into

extreme poverty this year, the World Bank's Global Economic Prospects report

said. 

     The U.S. economy is forecast to contract 6.1% this year, reflecting the

disruptions associated with pandemic-control measures. Euro Area output is

expected to shrink 9.1% in 2020 and Japan's economy is anticipated to shrink

6.1% as preventive measures have slowed economic activity. 

     China will be one of few counties to grow, at 1% in 2020 followed by a 6.9%

rebound in 2021. Even China's economic performance would be the weakest in

around 45 years. 

     The World Bank's estimate, more pessimistic than the global economic

outlook released by the International Monetary Fund in April, which predicted a

3.0% 2020 global contraction, said never before have so many countries entered a

recession at once. 

     -- WIDESPREAD CONTRACTION

     Current forecasts suggest that in 2020, the highest share of economies will

experience contractions in per capita GDP since 1870 at more than 90%, the

report said, even higher than the proportion of about 85% of countries in

recession at the height of the Great Depression of 1930-32. 

     Since 1870, the global economy has experienced 14 global recessions.

Current projections imply that the COVID-19 global recession will be the fourth

deepest in this period, the report said. 

     Economic activity among advanced economies is anticipated to shrink 7% in

2020, the report said, as domestic demand and supply, trade, and finance have

been severely disrupted. 

     "This is a deeply sobering outlook, with the crisis likely to leave

long-lasting scars and pose major global challenges," said Ceyla Pazarbasioglu,

World Bank Group vice president. 

     -- REBOUND IN 2021

     The semiannual forecast predicts the global economy will rebound next year

with growth of 4.2%, but warned that further downward revisions could come. 

     "The current episode has already seen by far the fastest and steepest

downgrades in global growth forecasts on record. If the past is any guide, there

may be further growth downgrades in store, implying that policymakers may need

to be ready to employ additional measures to support activity," said Ayhan Kose,

World Bank Prospects group director. 

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

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