With a projected 5.6% GDP growth in 2021, the global economy is likely to mark the strongest post-recession rebound in 80 years!
Growth in advanced economies is expected to reach 5.4% — the highest rate in nearly 50 years — powered by rapid vaccination and unprecedented fiscal- and monetary-policy support since the beginning of the pandemic.
Almost all advanced economies will go back to their pre-pandemic, per-capita income levels, in 2022.
The global economy is booming — or so it might seem. But in reality, the situation is quite different.
While in some parts of the world, the pandemic’s damage is being repaired quickly, many financially challenged countries find the going extremely tough as their economies have been battered by Covid-19.
Particularly in the 74 countries that are eligible to borrow from the World Bank’s International Development Association (IDA). According to the World Bank, “These are the world’s poorest: they account for roughly half of all people living on less than $1.90 a day. For them, the global “recovery” is simply nowhere to be seen.”
In 2021, their growth will be the slowest in more than two decades (except for 2020), reversing years of progress in poverty reduction. For them, the harm will not be repaired quickly. By 2030, one out of every four people here will still be living below the international poverty line.
Covid-19, in short, is doing the greatest harm to precisely the people — in precisely the places — that can least afford it. Even as some of the wealthiest nations begin to enjoy a return to prosperity and a semblance of normality, the World Bank says the pandemic continues to ravage the poorest countries. Maternal and child mortality is on the upswing in IDA countries because of reduced access to health services and food. Conflict and instability are also compounding the challenges for some countries.
Obviously, these countries will need significant help to dig out of the Covid-19 recession. In 2020, the pandemic all but halted economic growth in IDA countries and caused per capita income to shrink by 2.3%.
A World Bank analysis indicates their growth will lag that of advanced economies by about 2 percentage points a year on average from 2021 through 2023, widening an already large gap between the richest and poorest countries.
A significant gap also seems to have opened up in the health response to Covid-19: because of supply shortages, procurement struggles, and limited financing, the pace of vaccinations has been alarmingly slow.
As of July, only three doses of Covid-19 vaccine per every 100 people had been distributed. That amounts to less than one-tenth the rate in advanced economies.
To return to the path to convergence with wealthier economies, these IDA-assisted countries will need up to $376bn in additional financing through 2025 — above and beyond the $429bn in regular external financing needs.
“Many of these countries are already heavily indebted, so the option to borrow is limited,” noted Indermit Gill and Akihiko Nishio, two top World Bank executives.
By speeding up delivery of vaccines to these countries, their economies can be put back on the right track again.
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