With a projected contraction of 5.2% in the global GDP, the world bank says in its June 2020 Global Economic Prospects report that the pandemic will cause the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870.
The impact of the coronavirus-caused crisis will affect the global economy mostly “through lower investment, an erosion of human capital through lost work and schooling, and fragmentation of global trade and supply linkages,” the report stated.
According to the report, economic activity among advanced economies could shrink by 7% in 2020 while emerging market and developing economies are expected to shrink by 2.5% this year, the first contraction of this group in at least sixty years.
“Per capita incomes are expected to decline by 3.6%, which will tip millions of people into extreme poverty this year.” reads the report.
Economies with heavy reliance on global trade, tourism, commodity exports, and external financing have been hit the hardest while the magnitude of disruption will vary from region to region. The world bank further warns that interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development.
The U.S. economy is forecast to contract 6.1% this year, reflecting the disruptions associated with pandemic-control measures. Euro Area output is expected to shrink 9.1% in 2020 as widespread outbreaks took a heavy toll on activity. Japan’s economy is anticipated to shrink by 6.1% as preventive measures have slowed economic activity.