The coronavirus pandemic has triggered the most widespread global economic meltdown since at least 1870 and risks fuelling a dramatic rise in poverty levels around the globe, the World Bank has warned.
In a report the Washington-based organisation said the highest share of countries in 150 years would enter recessions at the same time.
As many as 90% of the 183 economies it examined are expected to suffer from falling levels of gross domestic product (GDP) in 2020, even more than the 85% of nations suffering from recession during the Great Depression of the 1930s.
Issuing the assessment in its half-yearly Global Economic Prospects (GEP) report, the organisation said the fall in world GDP would be the steepest since the second world war.
Dramatically cutting its growth expectations, the World Bank said it expected global GDP to shrink by 5.2% this year, in an economic decline more than twice as deep as the recession triggered by the 2008 financial crisis.
Sounding the alarm over the hit for poorer nations in particular, the body which provides loans and grants to developing and emerging economies to help tackle poverty, said it expected the first annual increase in net global poverty levels in more than two decades.
Economic activity among advanced economies is anticipated to shrink 7% this year as domestic demand and supply, trade, and finance is severely disrupted by the spread of the disease and lockdown measures used to contain it.
By contrast, nations where tough restrictions have not been used as much to tackle the virus and where government safety nets aren’t as extensive, GDP levels are expected to shrink by 2.5%. The World Bank said this would mark the first annual decline for these countries as a group in at least 60 years.
Incomes per head are expected to decline by 3.6% around the world, which the organisation warned would tip millions of people into extreme poverty this year.
The World Bank warned last month that the pandemic would push 60 million people into extreme poverty this year, although it is understood that the body plans to drastically increase this estimate in a report due in a matter of weeks.
Putting the scale of the current economic collapse in context, the World Bank said the Covid-19 crash was on-track to rank as the fourth-worst global recession out of 14 in the past 150 years. Since 1870, it has only been surpassed in terms of severity by crises at the outbreak of the first world war in 1914, the Great Depression in 1930-32 and after the demobilisation of troops following the second world war in 1945-46.
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“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said Ceyla Pazarbasioglu, vice president for equitable growth, finance and institutions at the World Bank.
“Our first order of business is to address the global health and economic emergency. Beyond that, the global community must unite to find ways to rebuild as robust a recovery as possible to prevent more people from falling into poverty and unemployment.”
Assuming lockdown measures are lifted from the middle of this year, global growth is forecast to rebound to 4.2% in 2021. However, the World Bank warned the risk from a more protracted pandemic, financial market upheaval and firms retreating from global supply chains could trigger an even bigger crash in world GDP this year of about 8%, followed by a sluggish recovery in 2021 of little more than 1%.
Faced with the heightened risk of a prolonged and painful crisis, Ayhan Kose, the World Bank’s prospects group director, said countries and organisations ought to stand ready to deploy further measures to support people and businesses.
“If the past is any guide, there may be further growth downgrades in store,” he said.
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