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World Bank: Global Economy (GDP) will shrink by 5.2% this year

-6.1% GDP for the US

But the World Bank also projected deep recessions for advanced economies. The report forecasts a 9.1% contraction in real GDP for the Euro Area and a 6.1% contraction for both the United States and Japan.

In the US, the World Bank expects a rebound of 4% GDP in 2021 assuming a recovery in consumer and investor confidence, made possible by “large-scale” policy support from both the Federal Reserve and Congress.

The World Bank said Monday that the COVID-19 pandemic will shrink global GDP by 5.2% in 2020, the worst since World War II and nearly three times as steep as the 2009 global recession.

Although the World Bank projects a rebound of 4.2% in 2021, it warned that an “even worse scenario is possible” if the health crisis takes longer than expected to contain. 

In its Global Economic Prospects report released Monday, the World Bank expressed specific concern over developing markets with weaker public health systems, where up to 60 million people could be tipped into extreme poverty

The World Bank’s forecasts are gloomier than the-3% figure floated by its sister organization, the International Monetary Fund,back in April.

Meanwhile China, which had achieved above 6% GDP growth over the last few years, is now projected to have growth of only 1% in 2020. The World Bank projects a sharp rebound of 6.9% growth for China in 2021.

“If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity,” said World Bank group director Ayhan Kose.

The World Bank’s forecasts are a considerable downgrade since its last global report in January 2020, just as COVID-19 began spreading outside of its origin in Wuhan, China. At the time, the World Bank had projected global growth of 2.5%.

Yahoo Finance - Brian Cheung

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