The world economy is projected to shrink by 3.2% in 2020 — its biggest contraction since the 1930s Great Depression — due to the pandemic, according to an analysis from United Nations economists on Wednesday.
The U.N. Department of Economic and Social Affairs said GDP growth in rich nations will plunge to –5%, as developing nations' output shrinks 0.7% this year. The COVID-19 crisis will wipe out US$8.5 trillion in global economic output over the next two years, it said, erasing all the gains of the last four years.
"The pandemic has unleashed a health and economic crisis unprecedented in scope and magnitude. Lockdowns and the closing of national borders enforced by governments have paralyzed economic activities across the board, laying off millions of workers worldwide," the report said.
"Governments across the world are rolling out fiscal stimulus measures — equivalent overall to roughly 10% of the world GDP — to fight the pandemic and minimize the impact of a catastrophic economic downturn," it said. "Torn between saving lives and saving the economy, some governments are already beginning to cautiously lift restrictions with a view to jumpstart their economies."
More than 34 million people, mostly in African countries, are expected to fall below the extreme poverty line this year because of the pandemic. Another 130 million people may be added to the ranks of those suffering from extreme poverty by 2030, with the economic disruptions disproportionately affecting lower-paying jobs that cannot be performed remotely at home by computer.
Severe blow to anti-poverty goals
When U.N. officials triumphantly announced in 2010 that one of the world body's anti-poverty Millennium Development Goals for 2015 had been achieved five years early — halving extreme poverty from 1990 to 2015 — it was a credit to international trade.
The U.N.’s next-phase Sustainable Development Goals aim to end poverty and hunger everywhere by 2030.
But with the pandemic coming on top of a U.S.-China trade war and other trade tensions around the globe, the new U.N. report shows the increasingly extreme improbability of lifting up the world’s 800 million people who are living in extreme poverty on less than US$1.90 a day.
In the worst-case scenario, the global economy could shrink by 4.9% in 2020, according to the 29-page report, followed by a further 0.5% contraction in 2021 if there is a second wave of coronavirus infections that force major economies to reinstitute lockdowns in this year's third quarter.
Nearly 90% of the world economy has been locked down to slow the spread of the virus, which has disrupted global supply chains, slashed consumer demand and cost tens of millions of jobs. World trade is forecast to contract by almost 15% in 2020.
But a modest 3.4% growth is expected in 2021, just barely enough to make up for the lost output.
“The pace and strength of the recovery from the crisis not only hinges on the efficacy of public health measures in slowing the spread of the virus, but also on the ability of countries to protect jobs and incomes, particularly of the most vulnerable members of our societies," said Elliott Harris, the U.N. chief economist and assistant secretary-general for economic development.