It’s the big leap backwards. Global gross domestic product (GDP) is expected to contract by 5.2% in 2020, according to the latest World Bank forecasts, released on Monday, June 8. The decline, expected at -9.1%, will be most marked in the world in the euro zone. Never before have so many countries experienced such a recession since 1870. “It’s a devastating blow to the world economy”, says World Bank President David Malpass. In April, the International Monetary Fund (IMF) was forecasting a 3% decline in world GDP.
The recession in poor and emerging countries should not exceed – 2.5% in 2020, against – 7% in developed countries. But the crisis in these largely informal economies will be more difficult to combat, due to the lack of sufficient budgetary means and because of a weak administrative capacity to distribute aid such as unemployment benefits.
In a note published in early June, the IMF calculated that budgetary spending to face the crisis represented 1.4% of GDP in low-income countries, 2.8% in emerging countries and 8.6% in economies advanced. The latter have the capacity to go into debt, unlike the others. However, in four out of ten poor and emerging countries, public debt has increased by at least 20% since 2007.
“There are limits to our ability to tell the future”
“Many of them are less prepared to face a global slowdown” that during the 2009 crisis, worries the institution located in Washington. More than a temporary crisis, she fears that the pandemic will leave “Scars” deep and lasting savings because of the “Drop in investment”, of the’“Erosion of human capital among the unemployed” and some “Disintegration of world trade”. As a result of the pandemic, between 70 million and 100 million people could fall into extreme poverty.
Monday, June 8, the rating agency S&P Global Ratings found, in April, a “Recovery” of activity in emerging countries, even if the “Recovery will be very slow”, particularly in India. Foreign capital is gradually returning to these countries after a leak of $ 100 billion (88.6 billion euros) during the first weeks of the Covid-19 pandemic.
In these times of geopolitical and economic uncertainty, growth forecasts should be taken with caution. In addition to the uncertainty of the duration of the pandemic, there are those of the resilience of the economies and the worsening of trade tensions between China and the United States. William De Vijlder, chief economist at BNP Paribas, notes “A surge in forecast uncertainty”, with forks “Five times wider than at the end of 2018”. “We have to admit that there are limits to our ability to say the future”, pleads economist Branko Milanovic, citing the “Uncontrollable nature” of the crisis and its “Global reach”.