Will the World Economy Recover in 2021? The UN Says “No”
The world economy is expected to make a 4.7% recovery after having shrunk 4.3% due to the pandemic last year. The United Nations has stated that this is double the impact of the 2009 global financial crisis. According to The World Economic Situation and Prospects report, put forth by the UN Department of Economic and Social Affairs, developed countries shrank by 5.6% last year are projected to recover around 4%. On the other hand, developing economies contracted a bit less, 2.5% and should grow 5.7% this year. This sounds optimistic at surface level, but there are deeper factors at play here.
Around 131 million people descended into poverty last year. Unemployment rates and healthcare claims have skyrocketed. And inflation is expected to follow a similar course. But thanks to the many fiscal responses taken by governments, a Great Depression-like economic catastrophe was circumvented worldwide. That said, public debt has reached historic levels. All these factors combined mean it could take years, maybe even decades for the world to get back into a good rhythm.
The UN report warned that it would be critical for G20 economies to return to a positive growth trajectory. This would boost the rest of the world’s economies and make them more resilient to future crises. As new vaccines make their public appearance and distribution becomes widespread, this year’s outlook seems more optimistic. Nevertheless, The UN report suggests we manage our expectations, as COVID-19 is still on the loose and mandatory lockdowns remain an obstacle on the road to worldwide economic recovery.