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- The global economy will grow 5.6% – the most in 80 years – in 2021, the World Bank said Tuesday.
- Yet emerging economies will largely fall behind due to debt pressures and slow vaccination.
- Advanced economies must help with vaccination and policy support to avoid worsening inequalities, the World Bank said.
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The strongest economic rebound in eight decades will still leave much of the world struggling with the aftermath of the COVID-19 pandemic, the World Bank said Tuesday.
The global economy is expected to grow 5.6% through 2021, the institution said in a semiannual report published Tuesday. The forecast is up from a prior estimate of 4.1% growth and calls for the largest one-year expansion of the postwar era.
Yet the world will still be far from retaking the economic highs of early 2020. Global economic output will sit 2% below its pre-pandemic projections at the end of this year, the World Bank said. And in two-thirds of emerging economies, per-capita income will remain below pre-crisis levels through 2022.
The recovery has been and will continue to be uneven, David Malpass, president of the World Bank Group, said. Economic superpowers must support low-income countries with vaccination efforts and economic support if they hope to combat inequities through the rebound.
"While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world," Malpass said.
The US is projected to grow 6.8% through the year due to its leveraging of unprecedented fiscal and monetary support. That's up from a January estimate of 3.5%. China's economy is expected to grow 8.5%, up from a prior forecast of 7.9%.
Excluding China, emerging market and developing economies will lag the broader recovery with growth of 4.4%, the World Bank said. The countries' recoveries were likely to widen gaps in health, education, and living standards, all while advanced economies ride a wave of outsize demand to new eras of economic health.
Developing nations face slow vaccination and fast inflation
The cause of such countries' underperformance is fairly predictable. While the US, UK, and much of the Eurozone charge forward with vaccinations, developing countries are falling behind, and many are in the midst of their worst infection surges yet. Unless vaccination picks up in the embattled regions, persistent lockdowns risk slower growth and long-term scarring, the World Bank said.
Small, tourism-dependent economies are also set to fall behind, according to the report. Although advanced economies are steadily reopening, global travel will likely take longer to return to pre-pandemic norms as some restrictions stay in place. A lack of tourist income will hinder countries' ability to pay for economic relief and public-health measures.
Looming inflation concerns also threaten to hold emerging economies back, Ayhan Kose, director of the World Bank Prospects Group, said. Many emerging market and developing economies relied on fiscal support to bridge the pandemic downturn, but such aid left countries saddled with record debt piles. Now, as inflation surges in advanced economies, developing countries are stuck without additional stimulus and huge financial concerns.
"Unless risks from record-high debt are addressed, these economies remain vulnerable to financial market stress should investor risk sentiment deteriorate as a result of inflation pressures in advanced economies," Kose said.
When stronger inflation does slam emerging economies, it's likely to show up in soaring food prices, the World Bank added. The trend stands to further inflame food insecurity in low-income countries. Policymakers should look to keep inflation expectations in check and improve social safety nets to ensure the inflation overshoot doesn't turn into a prolonged upward spiral, the institution said.