RIO DE JANEIRO, BRAZIL – The World Bank on Tuesday, June 8, released its Global Economic Prospects report, pointing out that Brazil should register 4.5% growth in 2021. According to the report, the increase in economic activity in the country should be restrained due to the worsening of the Covid-19 pandemic this year. It is worth noting that in 2020, the country’s Gross Domestic Product (GDP) shrank by 4.1%.
For the Latin America and Caribbean region, the economy should grow by 5.2% with the easing of pandemic mitigation measures, the start of vaccination, the stabilization of prices of major commodities, and improved external conditions. Last year, the region’s GDP shrank by 6.5%.
Mexico’s economy should grow by 5% in 2021, driven by the manufacturing and service sectors, which should benefit from rising export demand associated with strong growth in the United States. Argentina’s economic recovery should reach 6.4% in 2021, but slow to 1.7% in 2022. Colombia is expected to grow by 5% this year, while the Chilean economy should increase by 5.5%. The growth estimate for Peru is for 10.3% this year – without yet recovering from last year’s 11.1% slump.
The report stresses that the region is still severely impacted by the Covid-19 pandemic, with new case numbers rising again after a decline in early 2021. It further recalls that vaccination is highly uneven across countries. Brazil, in particular, is facing the emergence of variants that have not only infected but reinfected people, the document states.
The Bank projects world growth to reach 5.6% in 2021, marking the strongest rebound from a recession in 80 years due to stimulus from the United States and faster growth in China, but restrained by “highly uneven” access to Covid-19 vaccines. Last year, world GDP shrank by 3.5%.
The most recent Global Economic Prospects report showed a 1.5 percentage point increase from forecasts in January, before Joe Biden took over as U.S. president and enacted a US$1.9 trillion stimulus package in the United States.
Since then, vaccines have become much more widely distributed in the United States and some other wealthy countries, increasing their output, while forecasts for emerging markets and low-income countries lag behind.
“This rebound is uneven and largely reflects strong recoveries in some major economies – most notably the United States, due to substantial fiscal support – amid highly uneven access to vaccines,” the World Bank said in its report.
Many emerging markets and developing economies are witnessing high numbers of Covid-19 cases, obstacles in vaccination, and withdrawal of support, the bank added.
Should vaccine distribution to developing countries be ramped up, Ayhan Kose, a World Bank economist, said that world gross domestic product (GDP) growth in 2022, currently forecast at 4.3%, could substantially increase to around 5%.
The World Bank’s growth forecast for the U.S. in 2021 increased by 3.3 percentage points to 6.8% in the latest report, the fastest pace since 1984, due to economic support that the bank described as “unprecedented in peacetime.”
The forecast for the euro zone was raised by 0.6 percentage point to 4.2%, while China’s improved by 0.6 percentage point to 8.5%.
World Bank President David Malpass has urged wealthy countries, including the United States, to release surplus doses of Covid-19 vaccines to developing nations as soon as possible.
Inflation
The World Bank report also noted risks associated with rising inflationary pressures that will add about 1 percentage point to global inflation in 2021. The bank said last year’s drop in inflation was “the weakest and shortest-lived of any of the five global recessions in the past 50 years.”
And the rise in inflation since May 2020 has been faster than in previous recoveries, but the bank said inflation expectations should remain firmly anchored, pointing to low and stable inflation in the long term.
The report also added that market concerns over inflation may increase borrowing costs in emerging markets and low-income countries, which are also the most challenged by short-term inflation due to rising food costs.
Poverty
The report points out that the lingering effects of the pandemic are still severe. Employment has not returned to pre-pandemic levels and revenue losses have exacerbated poverty and food security. The World Bank estimates that approximately 20 million people have fallen below the poverty line, on less than US$5.50 a day.