A UN report has flagged concerns about the global economy and the devastating effect the coronavirus pandemic has had. United Nations Conference on Trade and Development's (UNCTAD) Trade and Development Report 2020 has said that the world is staring at a situation that is equivalent to a complete wipeout of Brazil, India and Mexico's economies. The report estimated the global economy to contract 4.3 per cent and leaving global output short over $6 trillion by year end.
"In the wake of these shocks the global economy will contract by an estimated 4.3 per cent this year, leaving global output by year's end over $6 trillion short (in current US dollars) of what economists had expected it to be before the COVID-19 pathogen began to spread. In short, the world is grappling with the equivalent of a complete wipeout of the Brazilian, Indian and Mexican economies," stated the report.
It elaborated that as domestic activity goes for a toss, so does the international economy. It predicted trade to shrink around one-fifth this year, foreign direct investment inflows to dip 40 per cent and remittances to drop by over $100 billion.
The UNCTAD report also said that it expects South Asia to contract 4.8 per cent and South-East Asia to dip 2.2 per cent. South Asia is expected to recover 3.9 per cent in 2021, while South-East Asia is expected to pull up 4.3 per cent.
"In the case of India, the baseline scenario is a sharp recession in 2020 as strict lockdown measures to stem the virus' spread brought many productive activities to a halt across the country. Although we expect a rebound in 2021 in line with the growth rates of the Indian economy in recent years, the contraction registered in 2020 is likely to translate into a permanent income loss," said the report.
The UNCTAD report highlighted that globally economy was already in choppy waters in 2019. It said that countries were still expecting things to improve in 2020. "Lockdown has parachuted economists into unfamiliar territory. The current situation is not like a war economy where a switch to military spending sees output expand. Nor is it a traditional global supply-side shock where inflationary pressure is the big challenge for policy makers. Nor do we face a financial crisis where the banking sector is in the eye of the storm. In a global health crisis, putting lives before profits has triggered a series of simultaneous and mutually reinforcing supply, demand and financial shocks," it said.