“Gloomy colour” overshadows global economic picture

Saturday, 2020-07-11 16:20:02
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The World Bank forecasts that the world economy will see a serious decline in 2020, at 5.2%.
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NDO – Many parts of the world have been pushed into the worst recession period in history due to the COVID-19 pandemic, with all economies, from advanced ones to underdeveloped countries, striving to work out measures to reverse the current situation. However, the global economic picture is still filled with a gloomy colour.

The World Bank’s Global Economic Prospects report forecasts that the world economy will see a serious decline in 2020, at 5.2%. The Asian Development Bank (ADB) said that the damage could mount to US$5.8-8.8 trillion, equivalent to 6.4-9.7% of global GDP. The latest forecast of the International Monetary Fund (IMF) also stated that global GDP will decrease by 4.9% this year and the world economy will lose US$12 trillion by the end of 2021. This is a “red alert” to all countries and regions, posing the urgent task of quickly finding “painkillers” for economies severely damaged by the disease.

According to the US government’s data, the world’s largest economy declined decreased by 4.8% in the first quarter of the year. It is estimated that the US’s GDP will shrink at 5.7% in 2020, and the pandemic will possibly cause a loss of US$7.9 trillion in US economic output over the next decade. The European Union (EU) is also facing a serious “economic shock”. The European Central Bank (ECB) warned that the Eurozone could see a decrease of 5-15% in output and a 5.4% decline in economic growth, making 2020 the worst milestone since the euro was introduced in 1999. According to the World Bank, Russia’s GDP will also shrink by 6% this year, marking the sharpest decline in 11 years.

In Asia, even as lockdown measures are gradually being eased and some important economic activities have been restarted, economies continue to feel the heavy impact of the pandemic. As reported by the ADB, developing economies in Asia will have virtually no growth in 2020. The bank has lowered the growth forecast of this region to 0.1%, from the 2.2% level made in April, and this is the continent’s lowest growth rate since 1961. China, the second largest economy in the world, is forecast to grow by only 1% in 2020 after recording a year-on-year drop of 6.8% in Q1. Meanwhile, Japan also registered a decrease of 3.4% in the first quarter, with both private consumption and exports declining. The world’s third largest economy was even forecast to decrease by 22% in Q2 2020.

The Latin America and Caribbean region has fallen into its biggest recession in history. The IMF forecasts that the region’s GDP will drop 5.2% this year, exceeding the serious declines in the 1930s Great Depression, the 1980s economic crisis and the 2008 world financial crisis. Many regional economies will report “negative growth”, such as Brazil at -9.1%, Mexico at -10.5% and Argentina at about -9.9%. The United Nations Economic Commission for Latin America and the Caribbean (CEPAL) have even warned that “extreme poverty” will increase in all countries across the region, with the number of poor people expected to mount to 214.7 million from the current 186 million by the end of 2020, equivalent to 34.7% of the region’s total population. The 2020 African Economic Outlook by the African Development Bank (AfDB) also showed that the continent will suffer a major recession, with its GDP falling by 1.7-3.4% this year, and 24.6-30 million people will be unemployed as a result of the pandemic.

Financial stimulus packages have been launched by many countries to overcome the consequences of the COVID-19 storm. Taking over the rotating EU presidency for the second half of this year, Germany urged member states to show solidarity and pass a large-scale economic recovery plan, with a “recovery fund” of up to EUR750 billion, aimed at dealing with the aftermath of the disease. To mitigate the negative impact of the pandemic on people’s lives, especially the vulnerable sectors of society, governments in many countries in Asia, Africa and Latin America have also implemented economic support measures. Programmes to subsidise unemployed workers, support businesses and increase health spending have been widely deployed.

Limiting the negative impact of the pandemic and dispelling “gloomy clouds” overshadowing the economy are now the top priority of many countries’ governments. However, it remains unlikely for the world to grow confident about the economic recovery overnight, as the COVID-19 pandemic is still proceeding in a complicated and unpredictable manner.