The World Bank on Tuesday forecast that the global economy could expand by as much as 4% this year, recovering from the 4.3% contraction it suffered in 2020 in the aftermath of the Coronavirus pandemic outbreak that altered the previously announced outlook.
The forecast, according to its January 2021 Global Economic Prospects, however, is based on an assumption that an initial COVID-19 vaccine rollout becomes widespread throughout the year, even as it warned of a likely subdued recovery.
A solution, the group explained, will require policy makers moving decisively to tame the pandemic and implement investment-enhancing reforms.
Although the global economy is growing again after a 4.3% contraction in 2020, the pandemic has caused a heavy toll of deaths and illness, plunged millions into poverty, and may depress economic activity and incomes for a prolonged period. Top near-term policy priorities are controlling the spread of COVID-19 and ensuring rapid and widespread vaccine deployment. To support economic recovery, authorities also need to facilitate a re-investment cycle aimed at sustainable growth that is less dependent on government debt.
Commenting, World Bank Group President, David Malpass, noted that “while the global economy appears to have entered a subdued recovery, policymakers face formidable challenges—in public health, debt management, budget policies, central banking and structural reforms—as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth.”
For him, therefore, and in order to “overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labor and product market flexibility, and strengthen transparency and governance.”