World Bank Predicts Worst Global Economic Downturn Since 1940s
Earlier this month, the World Bank released an updated “Global Economic Prospects” report predicting, among other things, that millions of people around the world would shift into extreme poverty due to the unprecedented economic and health crises resulting from the COVID-19 pandemic. The bank’s report estimated that global economic activity will decrease by 5.2 percent in 2020.
According to coverage of the report in the Associated Press, this downturn would be the worst contraction since the 13.8 percent global recession following the end of World War II in the 1940s. The new estimate comes as a radical shift away from the bank’s January prediction that the global economy would grow by 2.5 percent.
For the United States specifically, the World Bank believes GDP will decline 7 percent before a 3.9 percent growth in 2021. Comparatively, analysts at the National Association for Business Economics predicted a 5.9 percent dip for the U.S.
The amount of income per person is also projected to decline, as more than 90 percent of developing markets and countries are experiencing drops in per capita incomes. The downturn in per capita incomes for all countries is predicted to average 6.2 percent.
Analysts warned that their prediction was based on the assumption that the economy would start to recover after governments reopen. However, if a second coronavirus wave occurs, the bank believes that economic growth will fall further behind and take longer to recover.
“The pandemic highlights the urgent need for health and economic policy action, including global cooperation, to cushion its consequences, protect vulnerable populations, and improve countries’ capacity to prevent and cope with similar events in the future,” the World Bank says in a summary of highlights from the report. “Once the health crisis abates, structural reforms that enable strong and sustainable growth will be needed to attenuate the lasting effect of the pandemic on potential output.”