It has already been predicted that the coronavirus pandemic will plunge the world economy into its deepest recession since the Second World War. But it will be even worse than expected, says the World Bank.
Contrary to what the International Monetary Fund (IMF) announced in its most recent forecast in mid-April, the world economy will not fall from 2.9% growth last year to a decline of 3%, this year, making “Grand Containment” the worst economic crisis of the post-war period, warned on Monday, the other institution of Bretton Woods. No, the economic plunge will be even more marked, at 5.2%. And if we are still miles from the ravages of the Great Depression of the 1930s, we will never have seen such a proportion of all the economies of the planet (90%) show a decline in their wealth per capita at the same time.
“The COVID-19 pandemic crisis is exceptional in many respects,” said director of the World Bank Economic Outlook Team Ayhan Kose in a statement. It is shaping up to be the deepest recession in advanced economies since World War II, while emerging and developing economies are expected to experience the first contraction in output in sixty years. “
In terms of advanced economies, we are now expecting a contraction of 7% this year, notably due to a decline of 6.1% in the United States and Japan, and 9.1% in the region euro, predicts the institution, which does not stop at other developed economies in particular because it is mainly interested in emerging and developing countries.
To the latter, it predicts, at -2.5%, an economic downturn twice as severe as the IMF projected in April (-1%). The hardest hit countries, says the World Bank, are the worst hit and most dependent on world trade, tourism, commodity exports and external finance. Having become a hotbed of contamination, Brazil could see 8% of its economy disappear. Mexico (-7.5%) and Russia (-6%) will also be hit hard. China’s economic growth could slow from 6.1% last year to just 1% this year, “by far its weakest growth recorded in over 40 years.” Sub-Saharan Africa, for its part, will experience “an unprecedented recession” with an economic contraction of 2.8%.
More extremely poor
“These prospects are all the more alarming as the crisis risks leaving lasting consequences and giving rise to major planetary difficulties,” said Ceyla Pazarbasioglu, vice-president of the Bank’s fair growth, finance and institutions division. world. One of the consequences, she said, is likely to push 70 to 100 million more people into extreme poverty, which the Bank sets at an income of less than US $ 1.90 per day.
If we manage to control the progression of the pandemic well enough so that the rich countries can begin their deconfinement in the coming days, followed, a little later, by the developing economies, we can hope for a modest rebound in the global growth, of 3.9% and 4.6% respectively in 2021.
The difficult art of prediction
Experts unfortunately have a tendency, during recessions, to underestimate the magnitude of the fall that awaits economies, said the World Bank. As a sign of the extreme degree of uncertainty that prevails these days, an analysis of their work since 1990 also shows that their forecasts have never been so far apart from each other as these days.
It would be enough, the World Bank explains, for the pandemic to be longer than expected, for the financial markets to start to seize up or for a further escalation of trade tensions for a more pessimistic scenario to materialize. Thus, the fall in global growth could quickly not be 5.2%, but 8% this year, and the recovery next year will be limited to a meager 1% instead of the 4.2% expected .
It is therefore important to win the battle against COVID-19, says the World Bank, but also to deal with those who are most likely to suffer the health and economic repercussions, including informal workers in countries. in development who often have no access to public health care or a social safety net.