The global economy experienced a synchronized slowdown in 2019 and 2020 with a 3.5% decline in GDP in 2020.
This decline is due to the health crisis (Coronavirus) which has had a serious negative impact on women, youth, the poor, workers in the informal sector and those working in contact-intensive sectors. The launch of vaccination in some countries in December raised hopes for a possible end to the pandemic.
Economic data published after the WEO’s October 2020 forecast suggest a stronger than expected momentum on average in the different regions in the second half of 2020. Despite the high and growing number of pandemic victims, economic activity seems to be adapting over time to low contact intensity activity. Finally, the additional policy measures announced at the end of 2020, particularly in the United States and Japan, are expected to provide additional support to the global economy in 2021-22. These developments point to a stronger starting point for the global outlook 2021-22 than was foreseen in the previous forecast.
However, the increase in infections at the end of 2020, the resumption of containment measures, logistical problems related to vaccine distribution, and uncertainty about vaccine use are all important counterpoints to the positive news. Much remains to be done on the health and economic policy fronts to limit the lingering damage caused by the severe contraction of 2020 and to ensure a sustainable recovery.
Advanced economies, in general, have been able to provide significant fiscal support to households and businesses.
Advanced economies, in general, have been able to provide significant fiscal support to households and businesses. In addition, central banks have reinforced this support through asset purchase programs, loan financing facilities, and, in some cases, interest rate reductions.
Recovery trajectories vary. Indeed, the United States and Japan are expected to return to end-2019 activity levels in the second half of 2021, while in the euro zone and the United Kingdom, activity is expected to remain below end-2019 levels until 2022.
This wide divergence reflects to a large extent the differences between countries in terms of behavioral and public health responses to infections, the flexibility and adaptability of economic activity to low mobility, pre-existing trends and structural rigidities entering the crisis.
The 2020 Consolidated Financial Statements are available online.
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