WASHINGTON (AP) — The World Bank is upgrading the outlook for global growth this year, predicting that COVID-19 vaccinations and massive government stimulus in rich countries will power the fastest worldwide expansion in nearly five decades.
In its latest Global Economic Prospects report, out on Tuesday, the 189-country anti-poverty agency forecasts that the world economy will grow 5.6 per cent this year, up from the 4.1 per cent it forecast in January. The global economy last year shrank 3.5 per cent as the coronavirus pandemic disrupted trade and forced businesses to close and people to stay home.
The projected expansion would make 2021 the fastest year of growth since 1973’s 6.6 per cent. But the 2021 rebound will be uneven, the bank predicts, led by rich countries such as the United States (US) that could afford to spend vast amounts of taxpayer money to support their economies: 90 per cent of advanced economies are expected to return to pre-pandemic levels next year – measured by income per person – versus just a third of developing countries.
The World Bank is calling for wider distribution of COVID vaccines to low-income countries, where inoculations have gone slowly.
The bank expects the US economy to expand 6.8 per cent in 2021, up from the 3.5 per cent it forecast in January; the world’s biggest economy shrank 3.5 per cent last year as COVID-19 brought economic activity to a near standstill in the spring. But an aggressive vaccine rollout, along with low interest rates and massive government spending revived the economy.
China – the world’s number two economy and the first to emerge from the coronavirus recession – is forecast to grow 8.5 per cent in 2021 after expanding just 2.3 per cent last year.
The 19 European countries that share the euro currency are collectively expected to 4.2 per cent, reversing last year’s 6.6 per cent drop. And Japan is forecast to post 2.9 per cent growth this year after registering a 4.7 per cent drop in economic output last year.
The bank noted downside risks to its forecast, including the possibility that the pandemic lingers, that inflation flares and forces central banks to raise interest rates, and that countries struggle with high debt burdens.