Against the backdrop of a raging and devastating pandemic, the world economy is projected to shrink by 3.2% in 2020. Under the baseline scenario, GDP growth in developed countries will plunge to 5.0% in 2020, while output of developing countries will shrink by 0.7% The projected cumulative output losses during 2020 and 2021 nearly $8.5 trillion will wipe out nearly all output gains of the previous four years. The pandemic has unleashed a health and economic crisis unprecedented in scope and magnitude. Lockdowns and the closing of national borders enforced by governments have paralyzed economic activities across the board, laying off millions of workers worldwide. Governments across the world are rolling out fiscal stimulus measures equivalent overall to roughly 10% of the world GDP to fight the pandemic and minimize the impact of a catastrophic economic downturn.
While both new infections and COVID-19 related death have slowed down in recent weeks, uncertainties persist about the future course of the pandemic and its economic and social consequences. Torn between saving lives and saving the economy, some governments are already beginning to cautiously lift restrictions with a view to jumpstart their economies. The pace and sequence of recovery from the crisis will largely depend on the efficacy of public health and fiscal measures, containing the spread of the virus, minimizing risks of reinfection, protecting jobs and income and restoring consumer confidence.
Absent quick breakthroughs in vaccine development and treatment, the post COVID-19 world will likely be vastly different. The possibility of a slow recovery and prolonged economic slump with rising poverty and inequality looms large . A modest rebound mostly recovering lost output is expected for 2021. Large fiscal deficits and high levels of public debt will pose significant challenges to many developing countries, particularly commodity dependent economies and small island developing States, amid falling trade and tourism revenues and remittances. Stronger development cooperation supporting efforts to contain the pandemic and extending economic and financial assistance to countries hardest hit by the crisis will remain critical for accelerating recovery and putting the world back on the trajectory of sustainable development.