World Bank: Recession is Deepest in Decades

Key Highlights

• World Bank released its Global Economic Prospects report warning that pandemic economy is of historic proportions
• Report compares it to 13 other recessions that hit global economy since 1870
• Five major takeaways from report – four pessimistic and one guardedly optimistic

The World Bank pulls no punches in its recently released Global Economics Prospects report. Documenting each of its five takeaways, take a look:

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1. Worst global recession historically
   5. Overall global economy expected to shrink -5.2% in 2020 – high income economies like US to shrink -7% and emerging and developing economies to shrink by -2.5%
   6. Such a drop in global economy comparable to the deepest recession since end of World War II
   7. Affecting more countries that any other recession going back to 1870…even at height of Great Depression
   8. First time “emerging market and developing economies” experiencing recession as a group in at least 50 years which goes to show “how deep, how wide and how synchronized this crisis is,” according to Ayhan Kose, director of the World Bank’s Prospects Group.
   9. Concern about how quickly economic outlook deteriorated compared with earlier recessions
      1. In April, International Monetary Fund predicted global economy to contract by 3%
      2. In June, IMF predicted global economy to contract by 5.2%, -70% worse

• New report from Organization for Economic Cooperation and Development projects worse numbers…economic losses of -6% that will drop to -7.6% if second wave of COVID hits

2. Millions of people to be pushed back into poverty
   2. World Bank forecasts projects emerging market and developing economies to shrink by -2.5% in 2020 with average contraction of -5.2% and high income economies contracting (US) by -7.2%
   3. David Evans, senior fellow at Center for Global Development. “…a smaller shock in a low-income country can have a much bigger effect on putting people into poverty”
   4. World Bank anticipates up to 60M being pushed below extreme poverty line which leaves fewer economic resources for safety nets, cash support, small business loans, food banks and unemployment insurance
3. As rich countries hit, poorer countries to suffer more in long run
   1. Three major risks as result of pandemic: immediate health risk, economic and debt-management risk; and global system changes that less favorable to developing countries
   2. Harder for lower-income countries to fight poverty and invest in things that build future potential for growth such as education
4. Even under best-case scenario, World Bank calls numbers “devastating”
   1. Assuming all lockdown measures lifted by July, global economy would shrink by -4%, twice pace of 2009 global recession
5. Crisis provides opportunity to rebuild better
   1. Kose of World Bank, “What this crisis shows us is that health is the No. 1 priority.”
   2. Could galvanize wide range of countries to implement pandemic preparedness systems such as remedial education programs and social safety net programs to address poverty and inequality
   3. Evans from Center for Global Development, “There’s a temptation to say, ‘We’ve spent a lot,’ and countries have spent a lot. But this is an unprecedented economic crisis. Given that, we need an unprecedented response.”

Thanks to World Bank and BloombergNews.

Also read: June Teenth – A Day to Begin Again, World Bank Sees Global Growth Contracting -5.2% in 2020, UN Agency Predicts COVID-19 To Cost 195M Global Jobs in Q2 2020