The global economy is expected to expand 4% in 2021 as the vaccine rolls out worldwide, yet this growth will be a subdued one with a lower quality of life for most, predicts the World Bank.
The World Bank’s Global Economic Prospects report for 2021 details how the COVID-19 pandemic affected the growth of countries across the world, and how they will begin to recover after the vaccine rollout.
They warn that growth in 2021 will be a low year unless policymakers move 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.
In Sub-Saharan Africa, economic activity in the region is on course to rise by 2.7% in 2021 after a contraction of an estimated 3.7% in 2020, as the COVID-19 pandemic and associated lockdowns disrupted economic activity.
This contraction caused per capita income to shrink by 6.1% in 2020, setting average living standards back by at least a decade in a quarter of Sub-Saharan African economies.
“Hardest hit were countries with large domestic outbreaks, those heavily dependent on travel and tourism, and commodity exporters, particularly oil exporters,” reads the report.
Nigeria and South Africa saw a sharp fall in output in 2020. Nigeria’s economy is estimated to have contracted 4.1% in 2020, and in South Africa, where economic activity was on weak footing before COVID-19, output is estimated to have fallen 7.8% last year.
Oil exporters like Angola, Equatorial Guinea, Republic of Congo and South Sudan grappled with sharply lower prices while those with large travel and tourism sectors like Cabo Verde, Ethiopia, Mauritius, and Seychelles endured near-complete shutdowns of visitor activity.
“Expectations of a sluggish recovery in Sub-Saharan Africa reflect persistent COVID-19 outbreaks in several economies that have inhibited the resumption of economic activity. The pandemic is projected to cause per capita incomes to decline by 0.2% this year, setting Sustainable Development Goals (SDGs) further out of reach in many countries in the region. This reversal is expected to push tens of millions more people into extreme poverty over last year and this year,” predicts the World Bank.
“In South Africa, growth is expected to rebound to 3.3% in 2021. An expectation of weak growth momentum reflects the lingering effects of the pandemic and the likelihood that some mitigation measures will need to remain in place.”
World Bank Group President David Malpass says, 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.
“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.”
“The pandemic has greatly exacerbated debt risks in emerging market and developing economies; weak growth prospects will likely further increase debt burdens and erode borrowers’ ability to service debt,” World Bank Acting Vice President for Equitable Growth and Financial Institutions Ayhan Kose said.
“The global community needs to act rapidly and forcefully to make sure the recent debt accumulation does not end with a string of debt crises. The developing world cannot afford another lost decade.”
As severe crises did in the past, the pandemic is expected to leave long-lasting adverse effects on global activity. It is likely to worsen the slowdown in global growth projected over the next decade due to underinvestment, underemployment, and labor force declines in many advanced economies.
“If history is any guide, the global economy is heading for a decade of growth disappointments unless policymakers put in place comprehensive reforms to improve the fundamental drivers of equitable and sustainable economic growth,” reads the report.