The world economy has been projected to shrink by 3.2 percent wiping out nearly four years of output gains as economic activities around the world comes to grinding halt against the backdrop of the coronavirus pandemic, a new UN report said.
This means, the world will see some $8.5 trillion in overall losses, according to a mid-year economic analysis by the UN.
In its World Economic Situation and Prospect (WESP) report update released Wednesday, the UN Department of Economic and Social Affairs (DESA) said as of mid-2020, GDP in developed countries will plunge to -5 percent and the output of developing countries will shrink by 0.7 percent.
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“The global economic outlook has changed drastically since the launch of WESP 2020 in January,” noted Elliott Harris, the UN Chief Economist and Assistant Secretary-General for Economic Development, reports UN news.
Coronavirus has unleashed a health and economic crisis, unprecedented in scope and magnitude, with lockdowns and border closures paralysing economic activity and laying off millions of workers globally.
Harris said with large-scale restrictions of economic activities and heightened uncertainties, the global economy has come to a virtual standstill in the second quarter of 2020.
“We are now facing the grim reality of a severe recession of a magnitude not seen since the Great Depression.”
Countries around the world are rolling out stimulus measures, measuring roughly 10 percent of global GDP, to fight the pandemic and minimise the impact of a catastrophic economic downturn.
Some governments are already beginning to lift restrictions to jumpstart their economies halted by coronavirus outbreak. But recovery will largely depend on how well public health and fiscal measures work together to stem the spread of the virus, minimising reinfection risks, safeguarding employment and restoring consumer confidence.
The pace and strength of the recovery from the crisis will also rest on “the ability of countries to protect jobs and incomes, particularly of the most vulnerable members of our societies”, Harris said.
But without a quick breakthrough in vaccine development and treatment, DESA said the post COVID-19 world will “likely be vastly different” from the one we knew.
Although a modest rebound of around 3.4 percent, mostly recovering lost output, is expected for 2021, the report spelled out that “the possibility of a slow recovery and prolonged economic slump, with rising poverty and inequality, looms large”.
The UN forecast makes clear that stronger multilateral support and solidarity to contain the pandemic, along with economic and financial assistance to countries hardest hit by the crisis, will remain “critical for accelerating recovery and putting the world back on the trajectory of sustainable development”.