Online Courses (English)
This just in:

State PCS

Daily Updates


Global Economic Prospects: World Bank

  • 03 Jun 2020
  • 6 min read

Why in News

Recently, the World Bank has released a part of the Global Economic Prospects (GEP) June 2020 report.

  • The report highlighted that the Covid-19 pandemic will be having a “severe” short and long term effects on economic growth.

Key Findings

  • Impact on Global Poverty:
    • The Covid-19 pandemic and economic shutdowns have devastated the poor around the world which is unprecedented in modern times.
    • It has been estimated that 60 million people could be pushed into extreme poverty in 2020. These estimates are likely to rise further, with the reopening of advanced economies.
    • These economic lockdowns have also damaged the multiple channels, including lower investment and innovation, erosion of the human capital and a retreat from global trade and supply linkages.
      • It has also lowered the potential growth and labor productivity.
  • Emerging Market and Developing Economies (EMDEs):
    • EMDEs are most vulnerable and may face health crises, restrictions and external shocks like falling trade, tourism and commodity prices, as well as capital outflows.
    • These countries are expected to have a 3-8% output loss in the short term. But in the long term these countries will experience a drop in the level of output with a lowering of potential output growth.
    • Growth is likely to slow more in commodity-exporting EMDEs than in commodity-importing ones.
  • Spillover Effect over EMDEs:
    • EMDEs are also expected to witness the spillover effects of the U.S., the Euro Area and China, which represent almost half of global output.
    • As these countries are unlikely to return to pre-pandemic levels of output before the end of 2021.
  • Issue of Loan Repayments:
    • Earlier, G20 countries and commercial creditors had agreed to freeze loan repayments for low income countries (starting 1st May, 2020) till year-end. But these creditors had not yet implemented the same.
    • The delay by commercial creditors to freeze loan repayment is deepening poverty in the debtor country.
      • Most creditors are in advanced economies like the U.S., Europe, Japan, China and the Gulf.
  • Energy-Exporting Emerging Market and Developing Economies (EMDEs):
    • The Energy-Exporting Emerging Market and Developing Economies (EMDEs) are facing a dual problem of the public health crisis with strained fiscal positions due to the recent collapse in oil revenues.
    • The collapse in oil demand due to the worldwide economic lockdowns and a surge in oil inventories have made steepest one-month decline in oil prices on record.
    • Additionally, the low oil prices are unlikely to buffer the effects of the pandemic, though it may provide some initial support for the global recovery.

Steps Taken

  • Some of the policy choices being implemented worldwide include greater debt transparency to invite new investment.
    • Greater transparency is expected to assist borrowers, creditors and the official sector in the ongoing assessment of debt dynamics and debt sustainability.
  • The economies have also fastened their digital connectivity, and have also implemented an expansion of cash safety nets for the poor which intends to limit the damage and build a stronger recovery.


  • Short Term Steps:
    • Address Health Emergencies:
      • The countries should try to moderate the short-term impact of the pandemic on economic activity and employment.
      • Initially, countries need to address health emergencies and secure core public services to revive the economy.
    • Allocation of New Capital:
      • The worldwide economies should allow an orderly allocation of new capital toward sectors that would be productive in the new post-pandemic structures that emerge.
      • It has also suggested to fasten the adjustment of the capital and labour.
  • Long Term Steps:
    • Business and Governance:
      • The economies worldwide need to implement policies such as improving the environment for business, improving governance, and enhancing the outcomes of education.
      • It also includes public health investments ,encouraging the new types of businesses, jobs and governance systems in the post-pandemic world.
    • Financing and Productive Infrastructure.
      • Countries need to speed litigation and the resolution of bankruptcies and reform the costly subsidies, monopolies.
      • They also need to relook into the protected state-owned enterprises that have slowed development.

Way Forward

  • The pandemic and the subsequent economic shutdowns have caused a severe blow to the global economy, especially poorer countries. There is a need to rebuild the economy, and make growth more robust, resilient and sustainable.
  • There is also a need to make future economies more resilient to such economic shocks and capable of retaining more human and physical capital during the recovery.
    • It will help to fulfill the post-pandemic need for the creation of the new types of jobs, businesses and governance systems.


SMS Alerts

Please login or register to view note list


Please login or register to list article as bookmarked


Please login or register to make your note


Please login or register to list article as progressed


Please login or register to list article as bookmarked