- It is still a subdued recovery.
It is going to take time to recover
from this devastating year of 2020.
- Hello and welcome to Expert Answers, I'm Paul Blake.
The COVID-19 pandemic has led to the most significant
economic downturn since the second World War.
Now as vaccines begin to roll out, the global economy
could be turning a corner towards recovery.
So what do the next few months hold for economic growth?
I put that and other questions to the World Bank's
Acting Vice President for Equitable Growth
and Financial Institutions, Ayhan Kose.
So Ayhan start things off.
Give us your headline figure, your projection
for the global economy in 2021
and then from there, we can go and break things down
and look at it from different angles.
- So the good news Paul, growth is coming back in 2021.
At the global level
we are expecting growth to be around 4%.
If you look at advanced economies
they are going to deliver growth around 3.3%,
and if you look at emerging developing economies
we are expecting growth to be around, it should be 5%.
We just need to think about that big 5% number
in the case of emerging developing economies,
because China plays an important role
and China is doing quite well
and we expect China to deliver high growth number in 2021.
If you take out China
that number is going to be 3.4%.
Not so good news is that it is still a subdued recovery.
It is going to take time to recover
from this devastating year of 2020.
- And I mentioned one of the things
that's gonna be the key
to unlocking that recovery are these vaccines.
We've had some positive news here
in the past few weeks,
about vaccine approvals in different countries,
rollout beginning in different countries,
yet so much is still unknown.
How did vaccines factor into your forecast?
I'm assuming that it just creates tremendous uncertainty.
- Vaccines are critical as we think about health outcomes,
as we think about growth outcomes,
because vaccines are the kind of,
the single most important tool
we have under our disposal to contain COVID-19.
If things go well and we have widespread
vaccine deployment in advanced economies,
major emerging market developing economies
by the end of 2021,
I think that these growth forecasts
are going to be reasonably fair.
But if there are some hiccups in terms of you know
you might have supply bottlenecks
and then you look around the world,
it's not entirely clear, large chunks of population
are going to be willing to be immunized.
So if those types of downside risks materialize,
of course that will affect how we are going to get rid
of these distancing measures,
containment measures, lockdowns.
And then we might have weaker health outcomes
and weaker growth outcomes.
So the good news is that there are some
few very highly effective vaccines,
they are going to change the trajectory.
Now it is up to policy makers to make sure
that there is widespread deployment of vaccines
to a large share of population around the world.
- Talk to me a little bit about your upside projections
and your downside projections,
and for people who aren't aware
that this is sort of one of the ways
that you guys account for some of that uncertainty.
You sort of say this is our optimistic projection
and this is our pessimistic projection.
Can you talk to us a little bit
about what you're finding in this current report?
- You know we have certain assumptions
and the most important assumption,
is of course the vaccine deployment.
By the end of 2021, you'll have vaccines widely,
basically available in advanced economies,
major emerging market developing economies.
In 2022 global community does even better
in terms of distribution of vaccines.
If there are some supply bottlenecks,
if there is some hesitation to get immunized,
in large chunks of a society
then we might end up with much weaker growth outcomes.
In fact, global growth could go all the way down to 1.6%.
We are in a period,
We see very high debt levels around the world.
If we see you know, financial crisis in some countries
we might end up with even weaker growth outcomes.
There is an upside risk
and the upside risk is that these new vaccines
coming to the kind of the marketplace much faster,
distribution is much faster,
immunization rates is much higher by the end of 2021.
And if that happens,
of course you might see global growth
going all the way up to 5%
and that's our hope at the moment.
- Beyond the vaccines beyond COVID another big
I would imagine macroeconomic development
that is part of your forecast, is sovereign debt loads.
Can you talk to us a little bit about
how sovereign debt loads could affect the recovery
over the next few months?
- Well that's an important issue.
Obviously we are dealing with a health crisis
that already turned into an economy crisis,
but in many parts of the world,
debt levels are at record high.
And we need to do everything possible
to avoid this economic crisis,
turning into a financial crisis
because of a debt crisis taking place in some countries.
Now in an environment
when you have very low interest rates
you might say these countries
can of course service their debt.
Even if they service their debt
when the debt levels are very high payments are very high.
That basically limits their ability
to allocate their revenues, to infrastructure investment,
investment in health and education.
So impede overall growth
and ability to basically develop.
- Zooming out from the debt issue
specifically across the board,
what do policymakers and governments need to do
in your view to spur a strong or stronger
economic recovery after this pandemic?
- In the near term, single most important priority
is to contain the pandemic.
Help those in vulnerable segments of the society.
Aggressively deploy a vaccine
and then of course there are very large
support measures in place.
On the fiscal policy side, on the monetary policy side.
Governments need to be extremely careful
while thinking about withdrawing these policies.
We already talk about the record levels of debt
and the consequences of you know
increased interest rates.
There will be a recovery.
There will be some sort of normality
but obviously that recovery,
that normality will be different
than what we had prior to the pandemic.
I think we need to expect the best outcome
but prepare for the worst possibilities as well.
Policymakers need to do the right thing.
- Well Ayhan thank you so much for taking the time
to share your thoughts with us today.
- Thank you.
- A big thanks to Ayhan Kose for his time.
If you wanna go more in depth
on anything we've covered here today,
head on over to worldbank.org/gep.
And if you wanna write us
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Until next time, goodbye.