COVID-19’s lingering long-term effects are expected not just for people who suffered the virus, but the whole world will feel sluggish for the next decade, according to the World Bank.
The disinvestment during the pandemic, especially in developing regions, will compound over the decade, slowing down the economic spurt expected as the pandemic subsides, according to the World Bank Global Economic Prospects report.
“If history is any guide, unless there are substantial and effective reforms, the global economy is heading for a decade of disappointing growth outcomes,” according to the authors.
The report cited four reasons:
LIMITED ACCESS: Economic activity has been hit by reduced personal interaction, owing both to official restrictions and private decisions.
DISCOURGED INVESTMENT: Uncertainty about the post-pandemic economic landscape and policies has discouraged investment.
DISRUPTED EDUCATION: Disruptions to education have slowed human capital accumulation.
REDUCED TRADE: Concerns about the viability of global value chains and the course of the pandemic have weighed on international trade and tourism.
The bank projected 4% growth to the global GDP this year, but expects that to drop to 3.8% in 2022 as the expansion deflates in subsequent years as lagging effects set in from disinvestment. The global economy contracted 4.3%, following a few years of sluggish growth.
Developing regions are not the only ones suffering. Advanced nations fared worse, with a 5.4% contraction in 2020, followed by a 3.5% increase this year and 3.3% increase next year.
World Bank President David Malpass urged everybody to prepare for a radically changed environment.
“Governments, households, and firms all need to embrace a changed economic landscape,” Malpass wrote in the report. “While protecting the most vulnerable, successful policies will be needed that allow capital, labor, skills, and innovation to shift to new purposes in order to build a greener, stronger post-COVID economic environment.”
Although this year will see a burst of spending and repairing, it is far from certain it will be enough to fill the hole dug in 2020.
“Investment growth is expected to resume in 2021, but, despite an uplift from advances in digital technology, not add enough to reverse the large 2020 decline,” Malpass wrote. “The experience of past crises raises a further concern—without urgent course correction, investment could remain feeble for years to come.”
Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at firstname.lastname@example.org.
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