FX.co ★ World Bank downgrades outlook for global economy

Usually, the advent of the new year is associated with joy and miracles. However, with the coronavirus setting the tone for the market, one can hardly expect any positive news. The recent report from the World Bank has only confirmed this gloomy prediction. The bank has lowered its forecast for global economic growth.

Notably, the largest banking organization in the world has rarely made positive forecasts even in better times. Yet, the new outlook has turned out to be even sadder than ever before. In 2021, the world economy will expand by only 4%.

"The global economy is expected to expand 4% in 2021, assuming an initial COVID-19 vaccine rollout becomes widespread throughout the year. A recovery, however, will likely be subdued, unless policy makers move decisively to tame the pandemic and implement investment-enhancing reforms," the World Bank stated in its January 2021 Global Economic Prospects.

Nevertheless, the world economy will be able to advance only if the spread of COVID-19 is curbed and rapid and large-scale mass vaccination takes place. If the coronavirus is not taken under control, the global economy may experience a sharp decline. Under a downside scenario, the global economy may grow only by 1.6%. So, the near-term outlook remains highly uncertain.

"To overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labor and product market flexibility, and strengthen transparency and governance," World Bank Group President David Malpass highlighted.