In 2020, the world economy shrank by 4.3 per cent, over two and half times more than during the global financial crisis of 2009. The modest recovery of 4.7 per cent expected in 2021 would barely offset the losses of 2020, said the latest World Economic Situation and Prospects released by the UN.
In South Asia, the pandemic severely impacted most economies in the region, dragging down average GDP by -8.9 per cent in 2020. India, in particular, suffered its largest economic decline in history, with output falling by nearly 10 per cent in 2020.
“India’s economic growth has fallen from 4.7 per cent in 2019 to -9.6 per cent in 2020, as lockdowns and other containment efforts slashed domestic consumption without halting the spread of the disease, despite drastic fiscal and monetary stimulus,” the report said.
UN Secretary-General Antonio Guterres said the world is “facing the worst health and economic crisis in 90 years. As we mourn the growing death toll, we must remember that the choices we make now will determine our collective future.”
“Let’s invest in an inclusive and sustainable future driven by smart policies, impactful investments, and a strong and effective multilateral system that places people at the heart of all socio-economic efforts,” he said.
The Indian economy, which grew at 4.7 per cent in 2019, is estimated to contract by 9.6 per cent in calendar year 2020. The report said that the economy is forecast to recover and clock a 7.3 per cent growth in 2021 but slow down to 5.9 per cent in 2022.
The report said that the COVID-19 crisis has wreaked havoc on labour markets in the developing world. By mid-2020, unemployment rates had quickly escalated to record highs: 27 per cent in Nigeria, 23 per cent in India, 21 per cent in Colombia, 17 per cent in the Philippines and above 13 per cent in Argentina, Brazil, Chile, Saudi Arabia and Turkey.
Looking ahead, East Asia is projected to recover from a low base, with growth rebounding to 6.4 per cent in 2021, before moderating to 5.2 per cent in 2022. In most economies, domestic demand will be supported by continued monetary and fiscal stimulus. These baseline projections, however, are highly contingent on the successful containment of the virus, both domestically and abroad.
China will remain the region’s main driver of growth, with GDP growth projected to rebound to 7.2 per cent in 2021, from 2.3 per cent in 2020.
China’s economic recovery, however, is expected to be uneven across sectors. While infrastructure investment is expected to rebound strongly, private consumption growth is likely to remain moderate, the report said.
South Asia is also expected to expand by 6.9 per cent in 2021, but growth will remain insufficient to bring the region back to its 2019 output level. The recovery also hinges on the containment of the pandemic and effective policy stimulus going forward.
With multiple waves of the pandemic threatening to trigger another round of widespread lockdowns, downside risks to the growth outlook of the East and South Asia regions remain high. In South Asia, many economies face prohibitive fiscal restraints.
Effective domestic revenue mobilisation can make up some of the shortfalls, but concessions from international lenders will also be needed. Preemptive fiscal austerity could have disastrous consequences for the countries in the region, it added.