What’s Going On Here?The World Bank did more than just lower its global economic growth forecast for 2021 on Tuesday: it warned we could be rushing headlong into a “lost decade”. What Does This Mean?Every six months, the World Bank releases a report on the state of the global economy and makes its predictions for what’s next. And this time around, it said the economy will grow by 4% in 2021 – down from June’s 4.2%. That might sound like a minor shift, but dig a little deeper and the damage is massive: the organization cut its outlook for US economic growth by half a percent to 3.5%, and the eurozone’s by almost one percentage point to 3.6%. Still, in what’s quickly becoming a habit, China managed to buck the trend: the World Bank upped its growth forecast to 7.9%. Why Should I Care?Zooming in: Your guess is as good as theirs.
The World Bank did acknowledge that this would be a year of “exceptional uncertainty”, so it also presented some other possible scenarios. If, say, vaccinations arrive more slowly than expected and governments buckle under financial strain, the global economy might only grow by 1.6% this year – if not fall into another recession entirely. If, on the other hand, vaccines are rolled out quicker than expected and countries get back on their feet pronto, economic growth could climb by as much as 5%.
The bigger picture: Lost and found.
To add insult to injury, the World Bank also pointed out that the pandemic’s likely to drag down growth all decade. Ongoing uncertainty and weak growth expectations could, after all, discourage companies from investing in new assets or tech, while lasting unemployment and school closures could lead to a drop-off in skilled labor. The World Bank reckons these challenges can be overcome, mind you – as long as governments spend big on infrastructure and push through employment-boosting reforms. | 