The World Bank says global economy is expected to grow by 4 per cent in 2021, assuming an initial COVID-19 vaccine rollout becomes widespread throughout the year.
It said this in a statement issued in Washington D.C. on Tuesday at the presentation of the January 2021 Global Economic Prospects.
It added that the said recovery would likely be subdued unless policy makers moved decisively to tame the pandemic and implement investment-enhancing reforms.
The World Bank also said that growth in Sub-Saharan Africa was forecast to rebound moderately to 2.7 per cent in 2021, while Nigeria’s growth was expected to resume at 1.1 per cent.
For the region, it said that while the recovery in private consumption and investment was forecast to be slower than previously envisioned, export growth was expected to accelerate gradually, in line with the rebound in activity among major trading partners.
“Expectations of a sluggish recovery in Sub-Saharan Africa reflect persistent COVID-19 outbreaks in several economies that have inhibited the resumption of economic activity.
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“The pandemic is projected to cause per capita incomes to decline by 0.2 per cent this year, setting Sustainable Development Goals (SDGs) further out of reach in many countries in the region.
“This reversal is expected to push tens of millions more people into extreme poverty over last year and this year,” it stated.
For Nigeria, the World Bank said activity was anticipated to be dampened by low oil prices, Organisation of Petroleum Exporting Countries (OPEC) quotas, falling public investment due to weak government revenues, constrained private investment due to firm failures and subdued foreign investor confidence.
It, however, said that the rebound in Africa was expected to be slightly stronger, although below historical averages among agricultural commodity exporters, adding that higher international prices for agricultural commodities were expected to sustain activity.
Projecting risks for the region, it said that they were tilted to the downside as growth in major trading partners could fall short of expectations.
The World Bank said that wide scale distribution of a COVID-19 vaccine in the region would likely face many hurdles, including poor transport infrastructure and weak health systems capacity.
“Such constraints, compounded by natural disasters such as recent devastating floods and rising insecurity, particularly in the Sahel, can delay recovery.
“Government debt in the region has increased sharply to an estimated 70 per cent of Gross Domestic Product (GDP) in 2020, elevating concerns about debt sustainability in some economies.
“Banks may face sharp increases in non-performing loans as companies struggle to service their debt due to falling revenues.
“Lasting damage of the pandemic can depress growth over long term through the chilling effects of high debt on investment, the impact of lockdowns on schooling and human capital development, and weaker health outcomes,” it said.
On the global scene, it said that to support economic recovery, authorities also needed to facilitate a re-investment cycle aimed at sustainable growth that was less dependent on government debt.
The World Bank however said that the collapse in global economic activity in 2020 was estimated to have been slightly less severe than previously projected, mainly due to shallower contractions in advanced economies and a more robust recovery in China.
“In contrast, disruptions to activity in the majority of other emerging markets and developing economies were more acute than expected,” it said.
David Malpass, the bank’s President said that while the global economy appeared to have entered a subdued recovery, policymakers faced formidable challenges as they tried to ensure that this still fragile global recovery gained traction and sets a foundation for robust growth.
“To overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labor and product market flexibility and strengthen transparency and governance,” it said.
The report said that the near-term outlook remained highly uncertain and different growth outcomes were still possible, adding that a downside scenario in which infections continued to rise and the rollout of a vaccine delayed, could limit the global expansion to 1.6 per cent in 2021.
Meanwhile, it said that in an upside scenario with successful pandemic control and a faster vaccination process, global growth could accelerate to nearly five per cent.
Examining the amplified risks of the pandemic, it said that as severe crises did in the past, the pandemic was expected to leave long lasting adverse effects on global activity.
“It is likely to worsen the slowdown in global growth projected over the next decade due to underinvestment, underemployment and labor force declines in many advanced economies.
“If history is any guide, the global economy is heading for a decade of growth disappointments unless policy makers, put in place comprehensive reforms to improve the fundamental drivers of equitable and sustainable economic growth.
“Policymakers need to continue to sustain the recovery, gradually shifting from income support to growth-enhancing policies,” it further said.
It added that in the longer run, in emerging markets and developing economies, policies to improve health and education services, digital infrastructure, climate resilience, and business and governance practices would help mitigate the economic damage caused by the pandemic, reduce poverty and advance shared prosperity.
The bank said that in the context of weak fiscal positions and elevated debt, institutional reforms to spur organic growth were particularly important.