The World Bank on Tuesday cut its global growth forecast for this year to 4%, AFP reported. It is two-tenths lower than previously forecast.
The bank, however, warned that the economic growth could be limited to 1.6% if COVID-19 cases continue to rise and there are delays in vaccine distribution, Reuters reported.
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“The near-term outlook remains highly uncertain,” the World Bank said in a statement. “A downside scenario in which infections continue to rise and the rollout of a vaccine is delayed could limit the global expansion to 1.6% in 2021,” its statement read.
The 2021 projection is 0.2 percentage points lower than its June projection.
As economic activity came to a halt due to the coronavirus pandemic, the global economy contracted by 4.3% in 2020.
In its semi-annual forecast on Tuesday, the World Bank said shallower contractions in advanced economies and a more robust recovery in China helped avert a bigger collapse in the global economy. However, disruptions were more acute in most other emerging market and developing economies, it added.
The developing economies and emerging markets, which includes China, are expected to grow by 5% in 2021 after contracting by 2.6%, last year.
China’s economy contracted by 2% in 2020 and is expected to grow by 7.9%, this year.
If China is removed from this group of countries, the developing economies and emerging markets will grow by 3.4% this year. They contracted by 5%, last year.
“The global community needs to act rapidly and forcefully to make sure the latest wave of debt does not end with debt crises,” the World Bank’s report read.
The advanced economies are expected to grow by 3.3% in 2021, instead of 3.9% as initially forecast, the World Bank said.
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The United States is expected to grow by 3.5% in 2021 after it contracted by 3.6% contraction last year. Similarly, the euro area was expected to grow by 3.6%, after it shrunk by 7.4% in 2020.
Japan will grow by 2.5% in 2021. It contracted by 5.3%, last year.