The global economy is expected to expand by 4 percent in 2021, after a 4.3 percent contraction in 2020, on the back of the initial COVID-19 vaccine rollout globally in 2021, the World Bank said.
In its global economic prospects 2021 report, released on Tuesday, the World Bank expected recovery from pandemic to likely be subdued and may depress economic activity and incomes for a prolonged period, unless policy makers move decisively to control the pandemic’s spread and implement investment-enhancing reforms.
The collapse in global economic activity in 2020 is estimated to have been slightly less severe than previously projected, mainly due to shallower contractions in advanced economies and a more robust recovery in China. In contrast, disruptions to activity in the majority of other emerging market and developing economies were more acute than expected, according to the report.
For Egypt, the report predicts economic growth to slow down to 2.7 percent in FY2020/2021, down from 3.6 percent in 2020, and to bounce back to 5.8 percent in 2022.
The report attributed the economic growth contraction in FY20202021 to the collapse in tourism, gas extractives and a slowdown in other key sectors such as manufacturing.
For the Middle East and North Africa (MENA) region, the report projected economic activity to recover modestly to 2.1 percent in 2021, reflecting the lasting damage from the pandemic and low oil prices.
The report said that the recovery is contingent on containment of the pandemic, stabilising oil prices, no further escalation of geopolitical tensions, and the assumption of a vaccine rollout in the second half of the year.
By 2022, after two years of expected recovery, output is still expected to be about 8 percent below the output projected prior to the pandemic, with a larger impact on oil importers than exporters, according to the report.
Among oil exporters, growth is expected to rebound to 1.8 percent in 2021, driven by normalizing oil demand, the scheduled easing of the OPEC+ oil production cuts, policy support, and the gradual phasing out of domestic pandemic-related restrictions.
On the other hand, growth in oil importers is expected to bounce back to 3.2 percent in 2021 as mobility restrictions are gradually eased and exports and domestic demand recover slowly, according to the report.
Economic growth in emerging market and developing economies, including China, is also expected to grow by 5 percent in 2021, after a contraction of 2.6 percent in 2020.
Excluding China, emerging markets and developing economies are forecast to expand by 3.4 percent in 2021 after a contraction of 5 percent in 2020, according to the report.
Among low-income economies, activity is projected to increase by 3.3 percent in 2021, after a decline of 0.9 percent in 2020, according to the report.
The report said that the COVID-19 pandemic caused output losses in the region of an estimated 5 percent in 2020, adding that the income shock from the pandemic is expected to increase the number of people below the $5.50 per day poverty line in the region by tens of millions in 2021.
Output in MENA’s oil exporters is estimated to have contracted by 5.7 percent in 2020 and oil sector output growth continues to be constrained by commitments to the OPEC+ production cut agreement, according to the report.
It added that oil importers experienced a milder contraction of 2.2 percent in 2020, reflecting an initially limited COVID-19 outbreak in the first half of the year and lower oil prices, yet, the pace of new infections has risen rapidly and fresh policy uncertainty has compounded the impact of pandemic-related disruptions to activity.
Addressing the risks in the region, the report said that they are linked to the trajectory of the pandemic and its social impacts, downward pressure on oil prices, domestic political uncertainty, and geopolitical tensions.
The report said that COVID-19 has caused a heavy toll of deaths and illness, plunged millions into poverty, and may depress economic activity and incomes for a prolonged period. Top near-term policy priorities are controlling the spread of COVID-19 and ensuring rapid and widespread vaccine deployment. To support economic recovery, authorities also need to facilitate a re-investment cycle aimed at sustainable growth that is less dependent on government debt.