Key Indicators

  • World Bank predicts global GDP to shrink -5.2% in 2020
  • Bank foresees emerging and developing economies to shrink – 2.5%
  • Per capita output to contract in +90% of countries

The World Bank and Wall Street have been on different pages. Wall Street essentially wiped out its 2020 loss with a torrid rally on June 8 for an historic surge of some 45% since the market’s March low. ( June 11, however, it was a different story so perhaps those different pages are becoming one?)

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Meanwhile, the World Bank in its semi-annual Global Economic Prospects report released on June 8 said the global GDP will likely shrink -5.2% in 2020. (The World Bank uses market exchange rates as the basis for its forecasting.) The Bank also predicted that emerging and developing economies will likely shrink -2.5% in 2020. Such contractions would be the most since World War II.

Additionally, the World Bank indicated that per-capita output would contract in more than 90% of countries in 2020, the largest share of countries since 1870. Such a contraction has the potential of pushing 70M-100M people into deep poverty said the Bank’s vice president of equitable growth, finance and institutions, Ceyla Pazarbazioglu. And, such a global contraction, the first triggered solely by a pandemic, would be the fourth-deepest recession in the last 150 years after 1914, 1930-32 and 1945-46.

Advanced economies are expected to shrink some 7% with the euro area leading the contraction by a 9.1% rate. Emerging economies are expected to be the hardest hit.

Depending upon a scenario in which the COVID-19 pandemic lasts longer than expected and causing a reintroduction of movement restrictions, the Bank predicts the global economy would shrink nearly -8%. On the other hand, if the pandemic control restrictions were to be mostly lifted in the near term, the contraction would be -4%, still twice larger than the global financial crisis of 2009.

(Bloomberg Economics reported that the US provides approximately 15% of GDP support, Germany approximately 4.7% and Japan provides about 42% of GDP.)


Thanks to BloombergNews.

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