global economic prospects report

World Bank’s Global Economic Prospects

According to the report, COVID-19 is going to have a “severe” short and long term effects on economic growth.

World Bank’s Global Economic Prospects

Top Current Affairs 5th June 2020

Source | The Hindu


GS Paper II: Important International institutions, agencies and fora- their structure, mandate.



global economic prospects report

Key Takeaways

  • The Global Economic Prospects (GEP) is the World Bank’s semi-annual flagship publication on the state of the world economy.
  • According to the report, COVID-19 is going to have a “severe” short and long term effects on economic growth.

Read More: Upgradation of Group of Seven (G7) Club


Context: A part of the Global Economic Prospects (GEP) June 2020 report has been recently released by the World Bank.

  • The Global Economic Prospects (GEP) is the World Bank’s semi-annual flagship publication on the state of the world economy.
  • In a nutshell, the outlook for the global economy has darkened, amid slowing activity and heightened downside risks.
  • According to the report, COVID-19 is going to have a “severe” short and long term effects on economic growth.

What are the key findings of the World Bank’s Global Economic Prospects?

The Global Economic Prospects report of the World Bank noted the impact of COVID-19 on various prospects of the economy. These are discussed as below:

Impact on Global Poverty

  • There has been a devastating impact on the poor around the world due to Covid-19 pandemic and economic shutdowns which is unprecedented in modern times.
  • Further, the report estimated that 60 million people could be pushed into extreme poverty in 2020.
    • The report also looked into the possibilities that these estimates are likely to rise further, with the reopening of advanced economies.
  • Apart from poor around the world, these economic lockdowns have also damaged the multiple channels, including lower investment and innovation, erosion of the human capital and a retreat from global trade and supply linkages.
  • Potential Growth as well as Labour Productivity are also hampered as a result of this COVID-19 pandemic and economic lockdown.

Impact on Emerging Market and Developing Economies (EMDEs)

  • Emerging Market and Developing Economies (EMDEs) are the most vulnerable and are most likely to face health crises, restrictions and external shocks like falling trade, tourism and commodity prices, as well as capital outflows.
  • These countries are expected to have a 3-8% output loss in the short term. But in the long term these countries will experience a drop in the level of output with a lowering of potential output growth.
  • There are possibility of higher slow growth in commodity-exporting EMDEs than in commodity-importing ones.

What are the possible Spillover Effect over EMDEs?

  • Emerging Market and Developing Economies (EMDEs) are also expected to witness the spillover effects of the U.S., the Euro Area and China, which represent almost half of global output.
  • These countries are unlikely to return to pre-pandemic levels of output before the end of 2021.

Read More: GLOBAL NUTRITION REPORT 2020


What are the possible issue of Loan Repayments?

  • Previously, G20 countries and commercial creditors had agreed to freeze loan repayments for low income countries (starting 1st May, 2020) till year-end. But these creditors had not yet implemented the same.
  • The delay by commercial creditors to freeze loan repayment is deepening poverty in the debtor country.
  • Most creditors are in advanced economies like the U.S., Europe, Japan, China and the Gulf.

Energy-Exporting Emerging Market and Developing Economies (EMDEs):

The Energy-Exporting Emerging Market and Developing Economies (EMDEs) are facing a dual problem of the public health crisis with strained fiscal positions due to the recent collapse in oil revenues.

  • This collapse in oil demand due to the worldwide economic lockdowns and a surge in oil inventories have made steepest one-month decline in oil prices on record.
  • Additionally, the low oil prices are unlikely to buffer the effects of the pandemic, though it may provide some initial support for the global recovery.

What are the key recommendations made by the Global Economic Prospects Report?

  • The report suggests to make better policy choices. It includes:
    • Greater debt transparency
    • Major expansion of cash safety
    • Faster advances in digital connectivity.
  • Along with addressing health emergencies, policies to boost long term boost should also be considered. This includes:
    • Improving environment for business
    • Enhancing outcomes of education
    • Improving governance.

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