The global economy will shrink by 5.2% this year, the deepest recession since the Second World War, the World Bank said on Monday (June 8).
The multilateral lender forecasts economic activity among advanced economies to shrink 7% and emerging market and developing economies by 2.5% this year.
Per capita incomes are expected to decline by 3.6%, which the World Bank said will tip millions of people into extreme poverty.
“The blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing,” said the multilateral in a statement.
It also said there will be “lasting scars of the pandemic” that are likely to have long-term damage to investment, erode human capital through unemployment, and catalyse a retreat from global trade and supply linkages.
ISLAMIC ECONOMIES OUTLOOK
In regions with large concentrations of Muslim-majority countries and Islamic economies, economic activity is projected to contract between 2.7% for South Asia and 4.2% for the Middle East and North Africa.
The Middle East’s largest economy, Saudi Arabia, is forecasted to contract by 3.8% this year and 2.5% in 2021.
Next door, UAE’s GDP is expected to shrink by 4.5% in 2020 but expand by 1.4% in 2021.
“Activity among oil-exporting economies has decelerated across the board. Non-oil activity sharply slowed in large oil exporters (e.g., Saudi Arabia, United Arab Emirates) after the pandemic hit the region,” said the World Bank referring to activity in the first half of 2020.
The Gulf Cooperation Council’s (GCC) non-oil sectors will also be impacted.
“In Saudi Arabia and other GCC economies, low oil prices, elevated uncertainty associated with potential further spikes of COVID-19, and household level impacts of initial fiscal adjustments (e.g., VAT increase, payroll restraint) are expected to weigh heavily on non-oil activity,” wrote the World Bank.
It expects the most populous Arab country, Egypt, to see its economy shrink by 3% this year and by 2.1% next year.
In South Asia, Pakistan’s GDP is forecasted to contract by 2.6% in 2020 and 0.2% in 2021.
The multilateral does not expect Bangladesh to be hit as hard this year, forecasting 1.6% GDP growth in 2020 and a slower 1% increase next year.
“Trade activity has sharply fallen across the region. Sales and production in a number of key sectors in regional economies (e.g., autos in Pakistan, garment in Bangladesh) have been hit especiallyhard amid anemic demand,” the World Bank wrote.
“Business confidence in both manufacturing and services sectors have concomitantly fallen in economies like Pakistan.”
Indonesia, Southeast Asia’s largest economy, may see 0% growth this year and 4.8% in 2021.
Along with Malaysia, Indonesia is one of the economies highlighted by the World Bank as being hit by a sharp decline in commodity prices.
Malaysia’s GDP is expected to shrink by 3.1% this year and rebound by a positive growth of 6.9% in 2021.
Nigeria’s economic activity fell “precipitously” during the first half of this year, said the World Bank.
The region’s largest economy and most populous country, with a substantial Muslim population, is expected to shrink by 3.2% in 2020. Nigeria’s GDP growth is forecasted to bounce back by 1.7% in 2021.
“Amid the unprecedented collapse in oil prices, this year’s contraction in activity is set to be the most severe in four decades. The economy depends heavily on oil revenues, which represent over 80% of exports, about one-third of banking-sector credit, and one-half of general government revenues,” the World Bank report wrote.
Elsewhere, the World Bank forecasts Turkey’s GDP to shrink by 3.8% this year and rebound in 2021 with a 5% growth.
Turkey’s exports to the Euro area have suffered during the pandemic and its fiscal deficit is projected to widen as measures to support its economy amounts to 9% of GDP, said the lender.
© SalaamGateway.com 2020 All Rights Reserved