According to the World Bank, the global economy will expand by 4% in 2021

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According to the World Bank, the global economy will expand by 4% in 2021
Thu January 07, 2021

Latin America and the Caribbean: Regional economic activity is expected to grow 3.7%

Se espera que la economía mundial se expanda un 4 % en 2021, suponiendo que la distribución inicial de las vacunas contra la COVID-19 (coronavirus) se amplíe a lo largo del año. Sin embargo, es probable que la recuperación sea moderada, a menos que los encargados de la formulación de políticas actúen con decisión para controlar la pandemia y apliquen reformas que aumenten las inversiones, según la edición de enero de 2021 del informe Perspectivas económicas mundiales que publica el Banco Mundial.

Although the global economy is growing again after a 4.3% contraction in 2020, the pandemic has caused large numbers of deaths and illnesses, plunged millions of people into poverty, and may depress economic activity and incomes during a prolonged period. Controlling the spread of COVID-19 and ensuring rapid and widespread distribution of vaccines are the top short-term political priorities. To support economic recovery, the authorities also need to facilitate a reinvestment cycle aimed at achieving sustainable growth that is less dependent on public debt.

“While the world economy appears to have entered a moderate recovery, policymakers face enormous challenges - in public health, debt management, budget policies, central banking and structural reforms - in trying to ensure that this still fragile global recovery gains momentum and lays the foundation for robust growth, ”said David Malpass, President of the World Bank Group. "To overcome the impacts of the pandemic and counteract the adverse factors that affect investments, it is necessary to give a big boost to the improvement of the business environment, increase the flexibility of the labor market and products, and strengthen transparency and governance."

The collapse of global economic activity in 2020 is estimated to have been slightly less severe than originally projected, mainly because the contraction in advanced economies has been less pronounced than anticipated, as the recovery in China has been stronger than anticipated. By contrast, shocks to activity in most other emerging markets and developing economies were more severe than expected.

"The financial fragilities of many of these countries will also need to be addressed, as the growth crisis affects household budgets and the balance sheets of vulnerable companies," said Carmen Reinhart, World Bank Group Vice President and First Economist.

As detailed in one of the chapters of the report, the short-term outlook remains highly uncertain and growth performance may still differ. In a negative scenario, in which infections continue to increase and the distribution of vaccines is delayed, global expansion could be limited to 1.6% in 2021. On the other hand, in an optimistic scenario, with successful control of the pandemic and a faster vaccination process, world growth could accelerate to almost 5%.

In advanced economies, an incipient recovery stalled in the third quarter following the resurgence of contagions, pointing to a slow and difficult recovery. GDP in the United States is projected to expand 3.5% in 2021, after an estimated 3.6% contraction in 2020. In the euro area, output is projected to grow 3.6% this year , after a 7.4% decline in 2020. Activity in Japan, which fell by 5.3% in the year just ended, is expected to grow by 2.5% in 2021.

The aggregate GDP of emerging markets and developing economies, including China, is projected to grow by 5% in 2021, following a contraction of 2.6% in 2020. China's economy is expected to expand by 7, 9% this year, after 2% growth last year. Excluding China, emerging markets and developing economies are projected to expand 3.4% in 2021, following a 5% contraction in 2020. Among low-income economies, activity is projected to increase by 3, 3% in 2021, after a 0.9% contraction in 2020.

The analytical chapters of the latest World Economic Outlook report examine how the pandemic has amplified the risks around the accumulation of debt; how it could dampen long-term growth if concerted reform measures are not taken; and the risks associated with the use of asset purchase programs as an instrument of monetary policy in emerging markets and developing economies.

“The pandemic has greatly exacerbated debt risks in emerging markets and developing economies; The weak growth prospects are likely to further increase the debt burden and erode the debt-servicing capacity of borrowers, ”said Ayhan Kose Acting Vice President of Equitable Growth, Finance and Institutions at the World Bank. “The global community needs to act quickly and decisively to ensure that the recent accumulation of debt does not result in a series of debt crises. The developing world cannot afford another lost decade. "

As with other serious crises in the past, the pandemic is expected to have long-lasting adverse effects on global activity. The global growth slowdown forecast for the next decade is likely to worsen due to lack of investment, underemployment and a shrinking workforce in many advanced economies. If history can be used, the global economy is headed for a disappointing growth decade, unless policymakers implement comprehensive reforms that improve key drivers for equitable and sustainable economic growth .

Policymakers must continue to sustain the recovery, gradually shifting from income support to growth-promoting policies. In the long term, in emerging markets and developing economies, policies to improve health and education services, digital infrastructure, climate resilience, and business and governance practices will help mitigate the economic damage caused by the pandemic. , reduce poverty and promote shared prosperity. In the context of a weak fiscal situation and high debt, institutional reforms to stimulate organic growth are particularly important. In the past,

Central banks in some emerging markets and developing economies have employed asset purchase programs in response to pandemic-induced pressures from financial markets, in many cases for the first time. When these programs have been oriented to market problems, they appear to have helped stabilize financial markets during the initial stages of the crisis. However, in economies where asset purchases continue to expand and are perceived to be used to finance fiscal deficits, these programs can erode the operational independence of central banks, lead to monetary weakness leading to a de-anchoring of expectations. inflationary and increase concerns about debt sustainability.


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