Warning of ‘largest global downturn since 1940s’
THE World Bank has said world is facing an unprecedented health and economic crisis that has spread with astonishing speed and will result in the largest shock the global economy has witnessed in more than seven decades.
Millions of people are expected to be pushed into extreme poverty, economists said.
The stark warning comes as the boss of a leading budget airline claimed new quarantine rules would cost millions of jobs.
In an updated Global Economic Prospects report, the World Bank projected that global economic activity will shrink by 5.2% this year, the deepest recession since 13.8% in 1945-46 at the end of the Second World War.
The 5.2% downturn will be the fourth-worst global slump in the past 150 years, exceeded only by the Great Depression of the 1930s and the periods after the world wars when the economies of many war-torn countries were devastated and the US and other nations demobilised after massive defence build-ups.
Because of the steep contraction, the amount of income per person is expected to fall sharply, with more than 90% of emerging market and developing countries seeing per capita incomes declining.
For all countries, the drop in per capita incomes is expected to average 6.2%, much larger than the 2.9% fall during the 2009 financial recession.
Reflecting this downward pressure on incomes, World Bank economists said they expected the number of people in extreme poverty could grow by between 70 million and 100 million this year.
The 5.2% estimate for a decline in global output is 7.7 percentage points more severe than the World Bank’s January estimate that the world economy would grow by a modest 2.5% this year.
For the US, the updated forecast is for GDP to fall 7% this year, before growing 3.9% in 2021. That estimate is similar to top forecasters for the National Association for Business Economics who forecast a 5.9% drop the US this year.
The International Monetary Fund in April projected a drop in global output of 3% this year but it is expected that figure will be lowered when the IMF releases its forecast update in coming weeks.
For China, the world’s second largest economy, the World Bank forecast growth will slow this year to a barely discernible 1% but rebound to 6.9% in 2021.
For the 19 European countries that use the euro currency, the World Bank projected a drop of 9.1% this year followed by growth of 4% next year.
World Bank economists cautioned that their forecast was based on an assumption that the worst of the coronavirus outbreak was coming to an end and economies would pick up fairly quickly once governments begin to reopen.
If there is a second wave of the virus that disrupts economic activity later this year, then growth this year will fall even farther and the rebound next year will be weaker, the World Bank analysts said.
Meanwhile, Ryanair boss Michael O’Leary claimed millions of tourism jobs were at risk – because of the new requirement for travellers to the UK to go into quarantine.
He said his airline is experiencing a “collapse of inward bookings” for flights this summer, because people are being told to self-isolate for 14 days under Government measures to guard against a second wave of coronavirus.
All passengers, bar a handful of exemptions, now have to fill out an online locator form giving their contact and travel details, as well as the address of where they will isolate.
Mr O’Leary told Good Morning Britain: “We’re seeing thousands of British families booking their holidays in Portugal, in Spain and Italy, but there’s almost a collapse of inward bookings bringing those Italians, bringing those Europeans here to the UK, on which Britain’s tourism industry depends, particularly in the peak months of July and August.
“What’s irrational about it is all of those countries have a much lower Covid rate than the UK.”
He added: “Millions of jobs are going to be lost in British tourism because British hotels, British guest houses, British visitor attractions – all over London, the Globe, the London Eye, Madame Tussauds – will be empty, because the hundreds of thousands of Italians and Spanish and French people you get coming to Britain every July and August simply won’t travel.”
Ryanair joined with rival airlines EasyJet and British Airways in starting legal proceedings over the “disproportionate and unfair” policy.
Earlier, Mark Tanzer, chief executive of travel trade organisation Abta, called on ministers to outline a “coordinated plan” for encouraging people to travel to and from the UK.
He said: “We must restart international travel as soon as it is safe to do so, and businesses and customers would benefit from the Government outlining when this is likely to happen.
“There are many livelihoods at stake, and bookings will only start to pick up in earnest when people and businesses have a better idea as to what the Government’s plan is to open up the UK and access to international destinations.”
Border Force officers will carry out checks on arrivals and may fine or even refuse entry to a non-resident foreign national who refuses to comply with the quarantine regulations.
Lucy Moreton, professional officer at the Immigration Services Union,