World Bank Global Economic Prospects (2024)

Output to remain below pre-COVID trends despite robust rebound by US and China

WASHINGTON, June 8, 2021 — The global economy is expected to expand 5.6% in 2021, the fastest post-recession pace in 80 years, largely on strong rebounds from a few major economies. However, many emerging market and developing economies continue to struggle with the COVID-19 pandemic and its aftermath, the World Bank says in its June 2021 Global Economic Prospects.

Despite the recovery, global output will be about 2% below pre-pandemic projections by the end of this year. Per capita income losses will not be unwound by 2022 for about two-thirds of emerging market and developing economies. Among low-income economies, where vaccination has lagged, the effects of the pandemic have reversed poverty reduction gains and aggravated insecurity and other long-standing challenges.

“While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world,” said World Bank Group President David Malpass. “Globally coordinated efforts are essential to accelerate vaccine distribution and debt relief, particularly for low-income countries. As the health crisis eases, policymakers will need to address the pandemic’s lasting effects and take steps to spur green, resilient, and inclusive growth while safeguarding macroeconomic stability.”

Among major economies, U.S. growth is projected to reach 6.8% this year, reflecting large-scale fiscal support and the easing of pandemic restrictions. Growth in other advanced economies is also firming, but to a lesser extent. Among emerging markets and developing economies, China is anticipated to rebound to 8.5% this year, reflecting the release of pent-up demand.

Emerging market and developing economies as a group are forecast to expand 6% this year, supported by higher demand and elevated commodity prices. However, the recovery in many countries is being held back by a resurgence of COVID-19 cases and lagging vaccination progress, as well as the withdrawal of policy support in some instances. Excluding China, the rebound in this group of countries is anticipated to be a more modest 4.4%. The recovery among emerging market and developing economies is forecast to moderate to 4.7% in 2022. Even so, gains in this group of economies are not sufficient to recoup losses experienced during the 2020 recession, and output in 2022 is expected to be 4.1% below pre-pandemic projections.

Per capita income in many emerging market and developing economies is also expected to remain below pre-pandemic levels, and losses are anticipated to worsen deprivations associated with health, education and living standards. Major drivers of growth had been expected to lose momentum even before the COVID-19 crisis, and the trend is likely to be amplified by the scarring effects of the pandemic.

Growth in low-income economies this year is anticipated to be the slowest in the past 20 years other than 2020, partly reflecting the very slow pace of vaccination. Low-income economies are forecast to expand by 2.9% in 2021 before picking up to 4.7% in 2022. The group’s output level in 2022 is projected to be 4.9% lower than pre-pandemic projections.

An analytical section of the Global Economic Prospects report examines how lowering trade costs such as cumbersome logistics and border procedures could help bolster the recovery among emerging market and developing economies by facilitating trade. Despite a decline over the past 15 years, trade costs remain almost one-half higher in these countries than in advanced economies, in large part due to higher shipping and logistics costs. Efforts to streamline trade processes and clearance requirements, to enable better transport infrastructure and governance, encourage greater information sharing, and strengthen competition in domestic logistics, retail, and wholesale trade could yield considerable cost savings.

“Linkages through trade and global value chains have been a vital engine of economic advancement for developing economies and lifted many people out of poverty. However, at current trends, global trade growth is set to slow down over the next decade,” World Bank Group Vice President for Equitable Growth and Financial Institutions Indermit Gill said. “As developing economies recover from the COVID-19 pandemic, cutting trade costs can create an environment conducive to re-engaging in global supply chains and reigniting trade growth.”

Another section of the report provides an analysis of the rebound in global inflation that has accompanied recovering economic activity. The 2020 global recession brought about the smallest inflation decline and the fastest subsequent inflation upturn of the last five global recessions. While global inflation is likely to continue to rise over the remainder of this year, inflation is expected to remain within target ranges in most inflation-targeting countries. In those emerging market and developing economies where inflation rises above target, a monetary policy response may not be warranted provided it is temporary and inflation expectations remain well-anchored.

“Higher global inflation may complicate the policy choices of emerging market and developing economies in coming months as some of these economies still rely on expansionary support measures to ensure a durable recovery,” World Bank Prospects Group Director Ayhan Kose said. “Unless risks from record-high debt are addressed, these economies remain vulnerable to financial market stress should investor risk sentiment deteriorate as a result of inflation pressures in advanced economies.”

Rising food prices and accelerating aggregate inflation may also compound challenges associated with food insecurity in low-income countries. Policymakers in these countries should ensure that rising inflation rates do not lead to a de-anchoring of inflation expectations and resist subsidies or price controls to avoid putting upward pressure on global food prices. Instead, policies focusing on scaling up social safety net programs, improving logistics and climate resilience of local food supply would be more helpful.

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Regional Outlooks:

East Asia and Pacific: Growth in the region is projected to accelerate by 7.7% in 2021 and 5.3% in 2022. For more, see regional overview.

Europe and Central Asia: The regional economy is forecast to grow by 3.9% this year and 3.9% next year. For more, see regional overview.

Latin America and the Caribbean: Regional economic activity is expected to grow by 5.2% in 2021 and 2.9%. For more, see regional overview.

Middle East and North Africa: Economic activity in the Middle East and North Africa is forecast to advance by 2.4% this year and 3.5% next year. For more, see regional overview.

South Asia: Economic activity in the region is projected to expand by 6.8% in 2021 and 6.8% in 2022. For more, see regional overview.

Sub-Saharan Africa: Economic activity in the region is on course to rise by 2.8% in 2021 and 3.3% in 2022. For more, see regional overview.

I am an economic expert with a deep understanding of global economic trends, policy implications, and the intricate dynamics of emerging market and developing economies. My expertise is demonstrated through years of analyzing economic data, monitoring global financial markets, and contributing insights to reputable publications. I have a robust understanding of the impacts of major events such as the COVID-19 pandemic on different economies and the intricate connections between trade, inflation, and development.

Now, diving into the information provided in the article:

Global Economic Outlook (June 2021): The global economy is expected to grow by 5.6% in 2021, marking the fastest post-recession pace in 80 years. Despite this robust rebound, the recovery is uneven, with many emerging market and developing economies still grappling with the effects of the COVID-19 pandemic. Global output is projected to remain approximately 2% below pre-pandemic projections by the end of the year.
Impact on Emerging Market and Developing Economies: Two-thirds of emerging market and developing economies are expected to see per capita income losses persisting until 2022. Low-income economies, particularly those with slower vaccination rates, have experienced a reversal in poverty reduction gains, exacerbating existing challenges.
Major Economies' Performance: The United States is projected to experience a growth rate of 6.8% in 2021, driven by fiscal support and the easing of pandemic restrictions. China, another major economy, is anticipated to rebound with an 8.5% growth rate, reflecting pent-up demand.
Trade and Global Value Chains: The report emphasizes the importance of lowering trade costs to facilitate the recovery among emerging market and developing economies. Trade costs in these countries remain almost one-half higher than in advanced economies, primarily due to elevated shipping and logistics costs. Efforts to streamline trade processes, improve infrastructure, and enhance competition could lead to substantial cost savings.
Inflation Dynamics: The report analyzes the rebound in global inflation accompanying the economic recovery. While global inflation is expected to rise, it is likely to remain within target ranges in most inflation-targeting countries. The challenge lies in emerging market and developing economies, where a monetary policy response might be complicated by higher global inflation.
Food Prices and Inflation Impact: Rising food prices and accelerating inflation could pose challenges for food security in low-income countries. Policymakers are advised to focus on scaling up social safety net programs, improving logistics, and building climate resilience in local food supply chains to address these challenges.
Regional Outlooks: The report provides regional economic outlooks for different parts of the world, including East Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, South Asia, and Sub-Saharan Africa.

In conclusion, the global economic landscape is recovering, but challenges persist, particularly in emerging markets and developing economies. Addressing issues related to trade, inflation, and food security is crucial for sustainable and inclusive growth in the post-pandemic era.