The World Bank, true to its conservative approach, is not overly optimistic about the global economic recovery this year, despite the vaccine rollout.
The risks to global growth are many. COVID-19 infections worldwide are still increasing instead of plateauing, while the vaccine rollout even in advanced economies is slow. Developing nations like the Philippines, meanwhile, are confronting rising debt levels as global trading shrinks and state revenues decline amid shrinking economies.
The World Bank has warned that the increasing debt load of developing countries could create a new financial crisis unless a global effort is launched to remedy the situation.
The institution says with millions driven into poverty by the coronavirus recession, governments must find a way to move beyond direct aid and reignite investment to stimulate growth. Policymakers face “formidable challenges… as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth,” says World Bank president David Malpass.
The global economic recovery hinges on “widespread” vaccine rollout and sustained economic reopening. The latter is hard to implement if COVID-19 infections continue to climb. Several countries in Europe, notably the UK, are in fact in varying degrees of lockdown.
COVID-19 has caused enormous job losses as social distancing rules restricted the mobility of people and prevented workers from going to their workplaces. To restore and create jobs, the World Bank urged the government to focus on policies to boost investment in order to counter “the pandemic’s lasting scars.”
The lending institution sees the world economy expanding 4 percent this year, or two-tenths lower than it previously forecast, after shrinking 4.3 percent in 2020. But at the same time, the World Bank warns the outlook remains “highly uncertain” and that global economic growth could be as low as 1.6 percent this year if the downside risks materialize.
Pending the rollout of vaccines, countries like the Philippines will have to be watchful of virus spikes. The reopening of the economy will have to be gradual to avoid another lockdown situation that brought miseries to the population.