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Both personal and business confidence will remain subdued, reflecting the continued period of uncertainty until a vaccine or a treatment is finalised and distributed at an affordable cost.
Some vulnerable workers may choose to remain in isolation for fear of contracting the virus. The cost to mental health of prolonged social distancing will become more apparent and will be expensive.
Some economies will be forced to re-impose lockdown measures, which will interrupt their economic recovery and prevent the full re-establishment of supply chains and travel links.
There are several downside risks to our baseline scenario for The biggest of these is that the virus is not brought under control by the end of , or that second or third waves emerge and are equally as lethal.
At present, it is assumed that most people who contract and recover from Covid develop some immunity to it, but this has not been rigorously tested, and it is unclear how long such an immunity can last.
At any rate, recent research suggests that only a small proportion of the population has been infected, so levels of immunity will remain low overall.
The following year will be dominated by the challenge of manufacturing and distributing vaccines. Humankind has conquered deadly viruses through vaccinations before, but not with such a large and mobile population.
The politics of vaccine distribution will prove extremely tricky, and probably much worse than the recent controversies surrounding the distribution of personal protective equipment PPE.
Nevertheless, as more of the population either develops immunity through infection or protection via vaccination, the global economy should be in a position to continue to recover.
Toggle navigation. While the ultimate outcome is still uncertain, the pandemic will result in contractions across the vast majority of emerging market and developing economies.
It will also do lasting damage to labor productivity and potential output. The immediate policy priorities are to alleviate the human costs and attenuate the near-term economic losses.
Global coordination and cooperation will be critical. COVID has triggered the deepest global recession in decades.
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The baseline forecast envisions a 5. Per capita incomes in most emerging and developing economies will shrink this year.
It is also critical to address the challenges posed by informality and limited safety nets and undertake reforms that enable strong and sustainable growth.
East Asia and Pacific. Growth in the region is projected to fall to 0. Economic activity in the rest of East Asia and Pacific is forecast to contract by 1.
Among major economies of the region, Malaysia Europe and Central Asia. The regional economy is forecast to contract by 4.
Latin America and the Caribbean. The shocks stemming from the pandemic will cause regional economic activity to plunge by 7. Economic activity in Argentina is forecast to decline by 7.
Middle East and North Africa. Economic activity in the Middle East and North Africa is forecast to contract 4. Iran is expected to contract 5.
In many oil exporters, growth will be significantly constrained by policy cuts in oil production. Economic activity among oil importers is expected to contract by 0.
South Asia. GDP in the region is projected to contract by 2. In India, growth is estimated to have slowed to 4.
Output is projected to contract by 3. Pakistan Growth in Bangladesh 1. Sub-Saharan Africa. Economic activity in the region is on course to contract by 2.
The economy of Nigeria is expected to shrink by 3. Economic activity among commodity importing economies is anticipated to shrink this year despite lower oil prices, as international travel restrictions weigh on tourist visits.
Agricultural commodity exporters are also expected to experience a collapse in economic activity this year as foreign direct investment and tighter financial conditions delay investment.
Lockdowns and other restrictions needed to address the public health crisis, together with spontaneous reductions in economic activity by many consumers and producers, constitute an unprecedented combination of adverse shocks that is causing deep recessions in many advanced economies and emerging market and developing economies EMDEs.
Those EMDEs that have weak health systems; those that rely heavily on global trade, tourism, or remittances from abroad; and those that depend on commodity exports will be particularly hard-hit.
Beyond its short-term impact, deep recessions triggered by the pandemic are likely to leave lasting scars through multiple channels, including lower investment; erosion of the human capital of the unemployed; and a retreat from global trade and supply linkages.
These effects may well lower potential growth and labor productivity in the longer term. Immediate policy measures should support health care systems and moderate the short-term impact of the pandemic on activity and employment.