The coronavirus pandemic inflicted a 'swift and massive shock' that has caused the broadest collapse of the global economy since 1870 despite unprecedented government support, the World Bank said on Monday, June 8. READ:
Though dramatic, the current forecast falls short of the, which saw a global contraction of 14.5% from 1930 to 1932, while the post-war downturn in 1945-1946 was 13.8%, according to the World Bank.
Still, amid the unfolding pandemic there remain some"exceptionally high" risks to the outlook, particularly if the disease lingers or rebounds, causing authorities to reimpose restrictions that could make the downturn as bad as 8%. "Disruptions to activity would weaken businesses' ability to remain in operation and service their debt," the report cautioned.
That, in turn, could raise interest rates for higher-risk borrowers."With debt levels already at historic highs, this could lead to cascading defaults and financial crises across many economies," it said. But even if the 4.2% global recovery projected for 2021 materializes,"in many countries, deep recessions triggered by COVID-19 will likely weigh on potential output for years to come."
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