COVID-19 has caused extraordinary disruptions to the global economy. Economic contraction and fiscal and policy responses have been unprecedented, helping to ensure that the global economic contraction of -3.3 per cent in 2020 was severe but better than initially forecast.
Global economic recovery remains uncertain and is set to widen the gap between advanced economies, emerging markets and developing economies. The global economy is projected to grow 5.9 per cent in 2021, largely based on the strength of major economies such as the United States and China. Many other countries are not expected to return to pre-pandemic Global Domestic Product levels until well into 2023 and beyond.
Latin America and the Caribbean experienced the worst economic contraction in the region’s history, with the economy declining by 7 per cent in 2020. The pandemic continues to take a particularly heavy toll on sub-Saharan Africa. By the end of 2021, real Global Domestic Product per capita in sub-Saharan Africa will likely regress to the same level as 2007, and growth is expected to be significantly lower than the trend anticipated before the pandemic. Per capita output is not expected to return to pre-COVID-19 levels until after 2024 for half of those countries with a HRP for which data was available in October 2021.
The growing divergence reflects differences in pandemic developments and in policy and fiscal responses. COVID-19 vaccine availability and roll-out are highly unequal and unevenly distributed. Prior to the pandemic, half of all low-income countries were either already in debt distress or at high risk of debt distress. This same group of countries saw their debt burdens rise by a further 12 per cent to $860 billion in 2020.
The losses experienced by low- and middle-income countries will persist into the medium term as the virus mutates and fiscal space becomes ever more constrained. Failing to act now to contain the pandemic could cost in excess of $5 trillion of global GDP over five years. Hard-won development gains in poverty reduction, employment, food security, education and health care have been reversed. These losses will lead to higher debt and are likely to compound the vulnerability of people living in humanitarian crises, especially in fragile and conflict-affected economies.
Extreme poverty has increased significantly, after more than two decades of continued decline. An estimated 97 million additional people were pushed into extreme poverty in 2020 owing to the COVID-19 pandemic. Their prospects are not expected to improve. While global poverty is projected to decrease in 2021, this prediction is highly uncertain and not at a pace sufficient to close the gap caused in 2020. The prediction is also largely driven by high-income and upper-middle-income countries, while sub-Saharan Africa and low-income countries are expected to see further increases in poverty in 2021 and at a faster pace than pre-pandemic projections.
Following unprecedented contractions in 2020, the global total hours worked are expected to remain 4.3 per cent below pre-pandemic rates in 2021. This is the equivalent of 125 million full-time jobs – a dramatic downward revision from ILO’s June 2021 forecast. Recurrent waves of the pandemic are causing working-hour losses to remain persistently high in low- and lower-middle-income countries, disproportionately impacting women and younger workers. The gender gap in the labour force continues to be exacerbated. Although women accounted for 38.9 per cent of pre-pandemic total employment, they comprised 47.6 per cent of employment losses in 2020.
Higher vaccination rates help to strengthen labour market recovery. ILO estimates that for every 14 people fully vaccinated in the second quarter of 2021, one full-time equivalent job was added to the global labour market. However, none of these benefits accrued to low-income countries. More equitable access to vaccines would enable employment recovery in these countries.
- IMF, World Economic Outlook Update, July 2021, p. 1.
- IMF, World Economic Outlook Update, October 2021, p. 1.
- IMF, World Economic Outlook, April 2021, p. 9.
- IMF, World Economic Outlook Update, July 2021, p. 6.
- OCHA calculations based on the IMF World Economic Outlook Update, October 2021.
- World Bank Group, International Debt Statistics 2022, October 2021.
- IMF, World Economic Outlook, April 2021, p. xvi.
- IMF, World Economic Outlook Update, October 2021, p. xiv.
- World Bank, The Global Economy: on Track for Strong but Uneven Growth as COVID-19 Still Weighs, 8 June 2021
- Mahler et al. (2021) “Updated estimates of the impact of COVID-19 on global poverty: Turning the corner on the pandemic in 2021?” Retrieved from: 1 October 2021
- ILO, ILO Monitor: COVID-19 and the world of work. 8th edition. 27 October 2021
- ILO, World Employment and Social Outlook: Trends 2021. 20 August 2021
- ILO, ILO Monitor: COVID-19 and the world of work. 8th edition. 27 October 2021, p. 9
- ILO, ILO Monitor: COVID-19 and the world of work. 8th edition. 27 October 2021, pp. 15, 17