In wake of a deep global recession amid a still unchecked pandemic, the global economy is estimated to contract by 4.3 per cent this year, leaving global output short by over $6 trillion by the year end, says UNCTAD`s Trade and Development Report 2020. This will be equivalent to a complete wipeout of Brazil, India and Mexico's economies. The report warned that world trade will shrink by around one fifth this year, foreign direct investment flows by up to 40 per cent and remittances will drop by over $100 billion.
"The biggest falls in output will be in the developed world, with some likely to register a double-digit decline. But the greatest economic and social damage will be in the developing world where levels of informality are high, there is continued reliance on a few commodities or tourism as a source of foreign exchange, and fiscal and policy space is limited," said UN Conference on Trade and Development (UNCTAD) report.
Latin America is expected to be very hard hit with a drop in output this year of 7.6 per cent with particularly large declines, possibly double digit, in some of the largest economies, notably Argentina and Mexico. In contrast, growth will remain in positive territory in East Asia, albeit much lower than in 2019, it said. China, for example, is expected to grow at 1.3 per cent.
UNCTAD expects India's GDP to contract 5.9 per cent in 2020 and recover to 3.9 per cent next year. "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," it said.
In March this year, with COVID-19 contagion becoming a full-blown pandemic and the death toll rising, governments across the world announced lockdown and economic packages to prevent new infections and relieve overburdened health systems. This 'Great Lockdown', as the IMF calls it, has tipped the global economy into recession in 2020 on a scale not witnessed since the 1930s.
Data for the first two quarters of this year show output contracted more sharply than in 2008-2009, and in some cases registering the steepest drop on record. The IMF has projected that the global economy will fall into recession in 2020 on a scale matching the Great Depression of the 1930s.
The global economy is seen rebounding in 2021, but it will be uneven within and across countries and uncertainty will persist, the report said, warning that unemployment will be on an upward trend, more and more companies will be facing the threat of bankruptcy; supply chains will be fragile; confidence will be shaken and demand will be weak.