The global economy, which has severely contracted, will shrink by 5.2 percent in 2020, the World Bank said on Monday. this is due to the massive shock of the coronavirus pandemic and the shutdown measures to contain the virus.

The global lender also warned that its latest forecasts would be revised downward if uncertainty over the pandemic and business lockdowns persist, reports Reuters.

In its latest Global Economic Prospects report, the World Bank said that advanced economies are expected to shrink 7.0 per cent in the current calendar year, while emerging market economies will contract 2.5 per cent, their first since aggregate data became available in 1960.

The Covid recession is th first since 1870 to be triggered solely by a pandemic. On a per-capita GDP basis, the global contraction will be the deepest since 1945-46 as World War II spending dried up.

The updated forecasts show more damage to the economy than estimates released in April by the International Monetary Fund, which predicted a 3.0 per cent global contraction in 2020.

The IMF plans to update its forecasts on June 24 and Managing Director Kristalina Georgieva has said that further cuts are “very likely.”

World Bank officials said their baseline scenario assumes that social distancing lockdowns and temporary business closures begin to ease at the end of June.

But the report shows a downside scenario in which lockdowns are extended by three months this year. Should that occur, the 2020 contraction would deepen to 8.0 percent – 10 percent in advanced economies and 5.0 percent in emerging markets, with far more permanent business closures, a bigger collapse in global trade flows, layoffs and deep cuts in household spending.

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“The speed and depth with which it has struck, suggests the possibility of a sluggish recovery that may require policymakers to consider additional interventions,” World Bank Prospects Group Director Ayhan Kose told reporters.

“Global growth barely would begin to recover” at around 1.3 per cent next year.

The new forecasts also increased the World Bank’s estimate of how many people will be pushed back into extreme poverty by the pandemic, to between 70 million and 100 million from a previous estimate of over 60 million.

The World Bank report showed 2020 contractions of 6.1 per cent for the United States and Japan, a 9.1 per cent contraction for the euro zone, 8.0 per cent for Brazil and 3.2 per cent for India.

China is expected to maintain the growth of 1.0 per cent in 2020, down from a January forecast of 6.0 per cent.

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