World Economy Projected To Shrink By 3.2%: UN Report

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Against the backdrop of the COVID-19 pandemic, the world economy in 2020 is projected to shrink by 3.2 per cent, racking up some $8.5 trillion in overall losses and wiping out nearly four years of output gains, according to the UN Department of Economic and Social Affairs (DESA), which recently launched its World Economic Situation and Prospect (WESP) report update.

As of mid-2020, the gross domestic product (GDP) in developed countries will plunge to -5.0 per cent, while the output of developing countries will shrink by 0.7 per cent, the report said.

“The global economic outlook has changed drastically since the launch of WESP 2020 in January”, observed Elliott Harris, UN chief economist and assistant secretary general for economic development.

“With the large-scale restrictions of economic activities and heightened uncertainties, the global economy has come to a virtual standstill in the second quarter of 2020,” he added. “We are now facing the grim reality of a severe recession of a magnitude not seen since the Great Depression,” he said.

Although new infections and COVID-19-related death rates have recently slowed, the pandemic’s future course remains uncertain, as does the economic and social consequences that will follow, said the report.

Without a quick breakthrough in vaccine development and treatment, DESA maintains that “the post COVID-19 world will likely be vastly different”, from the one known.

Although a modest rebound of around 3.4 per cent, 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”.

Trade and tourism are paralysed, while large deficits and high levels of public debt will pose significant challenges for developing countries and small island states.

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”.