A Palestinian youth wearing a face mask rides his bike past a mural of a nurse injecting a vaccine against a coronavirus in Gaza City on December 31, 2020.
Mohammed Abed | AFP | Getty Images
SINGAPORE – The global economy could see “a lost decade” of subdued growth after the Covid-19 pandemic sparked the worst economic recession since World War II, the World Bank said Tuesday.
“If history is a guide, if there are no substantial and effective reforms, the global economy is facing a decade of disappointing growth results,” the Washington, DC-based group said in its report semi-annual report on the global economic outlook.
The bank said the economic outlook had already weakened before the pandemic due to an aging population and low productivity growth. And the global Covid outbreak is likely to make that slowdown worse, he added.
The World Bank forecast that global potential growth – which assumes the economy operates at full employment and capacity – will slow to 1.9% per year from 2020 to 2029. Before the pandemic, potential growth of 2.1% per year over the ten years was expected. Annual period, said the bank.
It was explained how the pandemic would slow global economic growth in the long term:
- Uncertainties and weak growth expectations can deter companies from making new investments.
- Persistent unemployment and worldwide school closings lead to a loss of knowledge and skills in the labor market.
Such a long-term slowdown in the global economy would materialize even if it recovered from last year’s slump in 2021. After a decline of 4.3% in 2020, the world economy is expected to grow by 4% this year, according to World Bank estimates.
But all is not lost. The bank said there are steps policymakers can take to mitigate or reverse the economic damage caused by the pandemic.
Possible measures include spending on infrastructure, supporting women’s employment and diversifying the economy so that it does not become overly dependent on specific sectors, the World Bank said.
The reforms carried out by countries should depend on their respective public finances, priorities and economic structures, he added.
“Reforms to increase investment in physical and human capital and increase labor supply could more than reverse the damage the pandemic caused to potential growth in the 2020s,” the World Bank said in its report.
“Investors have generally recognized previous reform efforts with improvements in their long-term growth expectations.”