The global economy is expected to expand by 5.6 per cent in 2021, the fastest post-recession pace in 80 years, largely on strong rebounds from a few major economies, the World Bank (WB) said recently. However, many emerging market and developing economies continue to struggle with the pandemic and its aftermath, the bank said in its June 2021 Global Economic Prospects.
Despite the recovery, global output will be about 2 per cent below pre-pandemic projections by the end of this year. Per capita income losses will not be unwound by 2022 for about two-thirds of emerging market and developing economies. Among low-income economies, where vaccination has lagged, the effects of the pandemic have reversed poverty reduction gains and aggravated insecurity and other long-standing challenges.
Growth in low-income economies this year is anticipated to be the slowest in the past 20 years other than 2020, partly reflecting the very slow pace of vaccination. Low-income economies are forecast to expand by 2.9 per cent in 2021 before picking up to 4.7 per cent in 2022. The World Bank group’s output level in 2022 is projected to be 4.9 per cent lower than pre-pandemic projections.
“While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world,” said World Bank Group president David Malpass said in a press release.
“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,” he added.
Among major economies, US growth is projected to reach 6.8 per cent this year, reflecting large-scale fiscal support and the easing of pandemic restrictions. Growth in other advanced economies is also firming, but to a lesser extent. Among emerging markets and developing economies, China is anticipated to rebound to 8.5 per cent this year, reflecting the release of pent-up demand.
Emerging market and developing economies as a group are forecast to expand by 6 per cent this year, supported by higher demand and elevated commodity prices. However, the 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.
Excluding China, the rebound in this group of countries is anticipated to be a more modest 4.4 per cent. The recovery among emerging market and developing economies is forecast to moderate to 4.7 per cent in 2022. Even so, gains in this group of economies are not sufficient to recoup losses experienced during the 2020 recession, and output in 2022 is expected to be 4.1 per cent below pre-pandemic projections.
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. Major drivers of growth had been expected to lose momentum even before the COVID-19 crisis, and the trend is likely to be amplified by the scarring effects of the pandemic.
An analytical section of the Global Economic Prospects report examines how lowering trade costs like cumbersome logistics and border procedures could help bolster the recovery among emerging market and developing economies by facilitating trade.
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.
Efforts to streamline trade processes and clearance requirements, to enable better transport infrastructure and governance, encourage greater information sharing, and strengthen competition in domestic logistics, retail, and wholesale trade could yield considerable cost savings, the World Bank report added.
Fibre2Fashion News Desk (DS)