The World Bank has said that the Coronavirus pandemic and strict lockdown measures taken to contain its transmission will leave a lasting effect on the global economy particularly the emerging market and developing economies, in its analysis of the situation. It urged the countries to undertake comprehensive policies with short-term measures to deal with the health emergencies at hand along with policies aimed at boosting long term growth. In an analysis, the World Bank had said that effects of measures imposed in wake of Covid-19 can lead to weakening of investment, innovation, employment, education, trade, supply chains and consumption.
World Bank Group President David Malpass emphasised the need for comprehensive policies and indicated that 60 million people could be pushed into extreme poverty in 2020. He said that the scope and speed of Covid-19 pandemic shutting down economies and devastating poor around the world was unprecedented so far.
“Current estimates show that 60 million people could be pushed into extreme poverty in 2020. These estimates are likely to rise further, with the reopening of advanced economies the primary determinant,” Malpass said during release of analytical chapters from World Bank’s flagship Global Economic Prospects report, in a conference call.
The World Bank emphasised that economies already had growth projections downgraded repeatedly over the past decade amid steadily declining potential growth, and may worsen situation emerging market and developing economies (EMDEs).
Malpass said that those emerging market and developing economies will be particularly hard hit which rely global trade, tourism, or remittances from abroad as well as those that depend on commodity exports .
In such economies, deep recessions associated with the novel coronavirus pandemic will likely exacerbate the multi-decade slowdown in growth and productivity, the primary drivers of higher living standards and poverty reduction.
The report said EMDEs face health crises, restrictions and external shocks like falling trade, tourism and commodity prices, as well as capital outflows. These countries are expected to have a 3-8% output loss in the short term, based on studies of previous pandemics, as per the Bank’s analysis.
EDMEs are also expected to witness the spillover effects of the U.S., the Euro Area and China, which represent almost half of global output, being unlikely to return to pre-pandemic levels of output before the end of 2021. If these three big economies simultaneously lose 1% in output, EDMEs (excluding China) are expected to lose 1.3% in their output with the lag of a year, the Bank warned. Growth is likely to slow more in commodity-exporting EMDEs than in commodity-importing ones.
Longer term, there is a risk not just of a drop in the level of output but a lowering of potential output growth, the Bank said. The severity of the current recession has been unseen in eight decades.
“In the average EMDE, over a five-year horizon, a recession combined with a financial crisis could lower potential output by almost 8% while, in the average EMDE energy exporter, a recession combined with an oil price plunge could lower potential output by 11%,” the report said.
(Based on inputs from agencies)
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