Global economy to expand 5.6% in 2021: World Bank

The World Bank expects the global economy to expand 5.6 per cent in 2021, the fastest postrecession pace in 80 years. Despite the recovery, global output will be about 2 per cent below pre-pandemic projections by the end of this year. The World Bank also finds that services sector and private consumption will offset pandemic effects in India.

The global economy’s expansion will largely be on strong rebounds from a few major economies, fsays WB’s latest edition of Global Economic Prospects. Among major economies, US growth is projected to reach 6.8 per cent this year, reflecting large-scale fiscal support and the easing of pandemic restrictions. Growth in other advanced economies is also firming, but to a lesser extent. China is anticipated to rebound to 8.5 per cent this year.

Despite the recovery, global output will be about 2 per cent below pre-pandemic projections by the end of this year. Per capita income losses will not be unwound by 2022 for about two-thirds of emerging market and developing economies. "While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world," said World Bank Group president David Malpass.

Emerging market and developing economies as a group are forecast to expand 6 per cent this year, supported by higher demand and elevated commodity prices. However, the recovery in many countries is being held back by a resurgence of Covid-19 cases and lagging vaccination progress, as well as the withdrawal of policy support in some instances.

In the case of India, the World Bank projected 8.3 per cent growth in FY22 followed by 7.5 per cent in FY23. This is supported by plans for higher spending on infrastructure, rural development, and health, and a stronger-than-expected recovery in services.

Better growth prospects since January, however, masks significant damage to economic activity from Covid-19. The economy is expected to follow the same, yet less pronounced, collapse and recovery seen during the first wave. Growth in FY23 is expected to slow to 7.5 per cent, says the Bank.

South Asia’s growth is projected to rebound to a stronger-than-expected 6.8 per cent in 2021, with India accounting for most of the upgrade as strong services sector activity more than offsets the economic effects of the worsening pandemic. The outlook is underpinned by a rebound in private consumption.

For India, the Bank projected 8.3% growth in FY22 and 7.5% in FY23