World Bank cuts 2021 global forecast to 4pc

WASHINGTON: The World Bank on Tuesday downgraded its outlook for the global economy, and warned the situation could erode further if Covid-19 infections rise further or vaccine rollouts are delayed.

After a contraction of 4.3 per cent in 2020, the world economy is projected to grow by 4.0 per cent this year, two-tenths lower than previously forecast, as more than half the countries were downgraded in the semi-annual Global Economic Prospects report.

But the report warns that the outlook remains “highly uncertain,” and GDP growth could be as low as 1.6 per cent if the downside risks materialise.

It also said the coronavirus pandemic has worsened the risks surrounding the rising debt load in developing nations, and it will take a global effort to avoid a new crisis. “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,” the World Bank’s Ayhan Kose said. “The developing world cannot afford another lost decade.”

Excluding China, the World Bank’s semi-annual Global Economic Prospects report estimates emerging markets and developing nations will grow just 3.4 per cent this year after a 5.0 per cent contraction in 2020.

Sub-Saharan Africa is forecast to experience economic growth of 2.7 per cent in 2021 as it rebounds from its first recession in 25 years. Regional output dropped by 3.7 per cent in 2020 as a result of the coronavirus pandemic and strict lockdowns enacted to stem its spread.

The recession last year halted almost two decades of growth at an average annual rate of four per cent. “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,” a World Bank statement said.

“The rebound is expected to be slightly stronger — although below historical averages - among agricultural commodity exporters.”

The bank named agricultural exporters such as Benin, Ivory Coast, Malawi and Uganda as countries whose economies contracted less sharply in 2020. Oil exporting nations such as Nigeria (where growth is estimated at 1.1 per cent in 2021) are expected to face a tougher recovery.

In South Africa, whose ailing economy is in recession, and has been hit by Africa’s worst Covid-19 outbreak, growth is expected to rebound to 3.3 per cent in 2021. The International Monetary Fund has predicted slightly higher growth of 3.1 per cent for sub-Saharan Africa this year.

The World Bank said that per capita income in the region had shrunk by 6.1 per cent last year, setting average living standards back by a decade in a quarter of sub-Saharan African countries. “This reversal is expected to push tens of millions more people into extreme poverty over last year and this year,” it warned.