Global economy projected to expand 5.6 pc in 2021, despite COVID-19 challenges: World Bank

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Representative Image

Washington [US], June 8 (ANI): Despite challenges from the Covid-19 pandemic, the global economy is expected to remain strong and expand 5.6 per cent in 2021, the fastest post-recession pace in 80 years relying on strong rebounds from a few major economies, the World Bank said on Tuesday.

In its June 2021 report on Global Economic Prospects, the World Bank said that despite the recovery, many emerging markets and developing economies continue to struggle with the Covid-19 pandemic and its aftermath.

The global output will be about 2 per cent below pre-pandemic projections by the end of this year and per capita income losses will not be unwound by 2022 for about two-thirds of emerging market and developing economies the World Bank noted.

Among low-income economies, where vaccination has lagged, the effects of the COVID-19 pandemic have reversed poverty reduction gains and aggravated insecurity and other long-standing challenges, said the World Bank.

"While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world," World Bank Group President David Malpass said.

"Globally coordinated efforts are essential to accelerate vaccine distribution and debt relief, particularly for low-income countries. As the health crisis eases, policymakers will need to address the pandemic's lasting effects and take steps to spur green, resilient, and inclusive growth while safeguarding macroeconomic stability," Malpass said.

The United States' growth is projected to reach 6.8 per cent this year, reflecting large-scale fiscal support and the easing of the pandemic restrictions. Among developing economies, China is anticipated to rebound to 8.5 per cent this year, reflecting the release of pent-up demand.

Moreover, emerging market and developing economies as a group are expected to expand 6 per cent this year, supported by higher demand and elevated commodity prices. However, recovery in many countries is being held back by a resurgence of Covid-19 cases and lagging vaccination progress, as well as the withdrawal of policy support in some instances, the World Bank said.

The rebound in these group of countries is anticipated to be a more modest 4.4 per cent, while the same recovery is forecast to 4.7 per cent in 2022.

The World Bank further informed that per capita income in many emerging market and developing economies is also expected to remain below pre-pandemic levels, and losses are anticipated to worsen deprivations associated with health, education and living standards.

In low-income countries, the growth this year is anticipated to be the slowest in the past 20 years except 2020, which partly reflects the slow pace of COVID-19 vaccination. Low-income countries are forecast to expand by 2.9 per cent in 2021 before picking up to 4.7 per cent in 2022.

Despite a decline over the past 15 years, trade costs remain almost one-half higher in these countries than in advanced economies, in large part due to higher shipping and logistics costs.

"Linkages through trade and global value chains have been a vital engine of economic advancement for developing economies and lifted many people out of poverty. However, at current trends, global trade growth is set to slow down over the next decade," said World Bank Group Vice President for Equitable Growth and Financial Institutions Indermit Gill.

"As developing economies recover from the COVID-19 pandemic, cutting trade costs can create an environment conducive to re-engaging in global supply chains and reigniting trade growth," he added.

According to the World Bank, the 2020 global recession brought about the smallest inflation decline and the fastest subsequent inflation upturn of the last five global recessions. Despite global inflation likely to rise over the remainder of 2021, inflation is expected to remain within target ranges in most inflation-targeting countries.

"Higher global inflation may complicate the policy choices of emerging market and developing economies in coming months as some of these economies still rely on expansionary support measures to ensure a durable recovery," World Bank Prospects Group Director Ayhan Kose said. "Unless risks from record-high debt are addressed, these economies remain vulnerable to financial market stress should investor risk sentiment deteriorate as a result of inflation pressures in advanced economies."

In low-income countries, rising food prices and accelerating aggregate inflation may also compound challenges associated with food insecurity. The World Bank suggested that policymakers in these countries should ensure that rising inflation rates do not lead to a de-anchoring of inflation expectations and resist subsidies or price controls to avoid putting upward pressure on global food prices. (ANI)