The Great Disruption caused by the COVID-19 pandemic has turned the global economy upside down, destroying millions of jobs and livelihoods. The global economic decline of 4.3 per cent in 2020 was the worst since the Great Depression and three times as bad as the contraction suffered during the Great Recession in 2009, found UN DESA’s World Economic Situation and Prospects 2021 report.
Even more worryingly, the devastation of COVID-19 is highly unevenly distributed, with low-skilled, low‑wage workers, women, migrants, those living in poverty and other vulnerable populations suffering the most. The crisis is estimated to have pushed an additional 131 million people worldwide below the poverty line in 2020. Nearly 800 million people are now expected to remain in extreme poverty by 2030.
The road to recovery will be long and painful. The forecasted 4.7 per cent growth in 2021 will barely be enough to offset last year’s economic losses. While macroeconomically resilient – and usually rich – countries can expect to rebuild and rebound fast, more vulnerable – predominantly developing – countries will suffer the deep and widespread scarring effects of the crisis against the backdrop of limited fiscal space and unsustainable debt burden.
As frequency and intensity of crises will likely increase with a run-away climate emergency, governments across the world will need to rethink fiscal and debt sustainability frameworks, expand social protection schemes, effectively address climate risks, address the causes and consequences of rising inequality and protect the most vulnerable population groups.
This will also require governments to resist the temptation of embracing premature austerity measures, which could hamper recovery. They will also face the challenges of preventing the buildup of asset prices and financial bubbles, taming raging inequality and putting the world economy on the trajectory of an inclusive and sustainable recovery.
Read the full World Economic Situation and Prospects 2021.