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Global economy expected to expand by 4% in 2021: World Bank

Although the global economy is growing again after a 4.3 per cent contraction in 2020, the pandemic has caused a heavy toll of deaths and illness, plunged millions into poverty, and may depress economic activity and incomes for a prolonged period.

January 05, 2021 / 09:57 PM IST
World Bank HQ in New York (Source: Flickr - Shiny Things)

World Bank HQ in New York (Source: Flickr - Shiny Things)

As the COVID-19 vaccine started rolling out in many countries, the World Bank expects that the global economy will expand four per cent in 2021, but will still remain more than five per cent below its pre-pandemic trend.

"The global economy appears to be emerging from one of its deepest recessions and beginning a subdued recovery," World Bank President David Malpass said on Tuesday in a forward to the Global Economic Prospects report, according to which a recovery will likely be subdued, unless policy makers move decisively to tame the pandemic and implement investment-enhancing reforms.

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Although the global economy is growing again after a 4.3 per cent contraction in 2020, the pandemic 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, the report said.

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COVID-19 Vaccine

Frequently Asked Questions

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How does a vaccine work?

A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.

How many types of vaccines are there?

There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.

What does it take to develop a vaccine of this kind?

Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.

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"While the global economy appears to have entered a subdued recovery, policy makers face formidable challenges – in public health, debt management, budget policies, central banking and structural reforms – as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth," said Malpass.

"To overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labour and product market flexibility, and strengthen transparency and governance," he said.

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 markets and developing economies were more acute than expected, the Bank said in its report. "Financial fragilities in many of these countries, as the growth shock impacts vulnerable household and business balance sheets, will also need to be addressed, Vice President and World Bank Group Chief Economist Carmen Reinhart said.

According to the report, global growth is projected to moderate to 3.8 per cent in 2022, weighed down by the pandemic's lasting damage to potential growth. In particular, the impact of the pandemic on investment and human capital is expected to erode growth prospects in emerging market and developing economies (EMDEs) and set back key development goals.

The global recovery, which has been dampened in the near term by a resurgence of COVID-19 cases, is expected to strengthen over the forecast horizon as confidence, consumption, and trade gradually improve, supported by ongoing vaccination, the report said.

Although aggregate EMDE growth is envisioned to firm to an average of 4.6 per cent in 2021-22, the improvement largely reflects China's expected rebound. Minus China, the recovery across EMDEs is anticipated to be more muted, averaging 3.5 per cent in 2021-22, as the pandemic's lingering effects continue to weigh on consumption and investment, the World Bank said. In his forward to the report, Malpass said that making the right investments now is vital both to support the recovery when it is urgently needed and foster resilience.

"Our response to the pandemic crisis today will shape our common future for years to come. We should seize the opportunity to lay the foundations for a durable, equitable, and sustainable global economy," he said.
PTI
first published: Jan 5, 2021 09:57 pm

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