By Chathushka Perera
New York, USA (CWBN) World Bank warns that the national level economic recessions witnessed worldwide, including that of largest economies, as a result of the Covid-19 pandemic, would manifest into one of the worst global economic crises witnessed in decades with its effects would be felt in the years to come, even after the pandemic is dealt with.
Adding to the suspense, the World Bank expressed its concerns over the inability to make projections for the coming years owing to the volatility of the current situation.
Nonetheless, given the global contraction of 5.2%, it is expected that emerging and developing economies would be the worst hit by regression, while some are already feeling the brute force of debt distress. The World Bank, stressed the need to support and protect vulnerable economies with “policy action to cushion” the effects of regress, especially in terms of sustainable development.
Despite strong objections levied by China, the only major economy to indicate growth this year, the G-20 decided on a six month extension of the grace period granted earlier this year to smaller nations, however, the World Bank had expressed the necessity a yearlong extension. In the case it would require further extension, the G-20 have elected to reconsider their decision.
Moreover, the World Bank notes that a deterioration of smaller economies would agitate a trend of regression among its larger counterparts, as in the case of the 2008-9 crisis. While keeping markets open is a valid strategy, the lending of loans at interest rates of 8 – 9.5 would have counterproductive consequences.
