The global economy is projected to grow by 4% in 2021 if the COVID-19 vaccine rollout continues throughout the year and is effective, the World Bank said.
In their annual January release of Global Economic Prospects, the Washington-based lender noted that the worst case scenario occasioned by delays to rollout the vaccine or an increase in cases could cut growth by 1.6%.
However, successful pandemic control and a faster vaccination process could accelerate growth to about 5%.
The report concluded that recovery will likely be subdued if governments fail to move decisively to tame the pandemic and implement investment-enhancing reforms.
The World Bank estimates that the global economy contracted by 4.3% in 2020 resulting from effects of the COVID-19 pandemic.
Sub-Saharan Africa is expected to rebound moderately to 2.7% in 2021, after contracting by an estimated 3.7% in 2020.
The World Bank forecast recovery is buoyed by private consumption and investment which are likely to be slower than previously envisioned with export growth expected to accelerate gradually, in line with the rebound in activity among major trading partners.
“The resumption in activity in major advanced and emerging economies and key trading partners of the region (Europe, China, US) is chiefly underpinned by positive news on vaccine development and rollout as well as new rounds of fiscal stimulus,” the World Bank noted.
World Bank Group President David Malpass said that there is need for a push to improve business environments, increase labour and product market flexibility
“While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges—in public health, debt management, budget policies, central banking and structural reforms—as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth,” he said.
“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.”
The collapse in global economic activity in 2020 is estimated to have been slightly less severe than was previously projected, due to shallower contractions in advanced economies and a more robust recovery in China, the report noted.
In contrast, disruptions to activity in the majority of other emerging markets and developing economies were more acute than expected.