Global economic growth could be limited to 1.6% in 2021 in a downside scenario in which COVID-19 infections continue to surge and vaccine rollouts are delayed, the World Bank said in its latest semiannual report on the world economy.
The World Bank warned that activity and financial conditions would deteriorate as a result of potential delays in the vaccine rollout process caused by logistical impediments and reluctance by the public to be immunized.
"In a more severe downside scenario including widespread financial stress, global growth could even be negative in 2021," the World Bank said.
In its baseline forecast, the World Bank projects the global economy to grow by 4% in 2021 after a 4.3% contraction in 2020 if the vaccine rollout becomes widespread throughout the year while policymakers contain the pandemic and implement reforms that boost investments. Global growth is expected to moderate to 3.8% in 2022.
In an upside scenario in which the pandemic is successfully contained while vaccination has a more rapid process, global GDP growth could accelerate to nearly 5% this year, the World Bank added.
The U.S. economy is projected to grow by 3.5% in 2021 following an estimated decline of 3.6% in 2020, according to the World Bank's baseline forecast. The eurozone economy is expected to expand by 3.6% after shrinking by 7.4% last year, while Japan's real GDP is forecast to rise by 2.5% this year after contracting by 5.3% in 2020.
China's economic growth is expected to accelerate to 7.9% from 2% last year. India is forecast to post real GDP growth of 5.4% after a 9.6% contraction in 2020.
Excluding China, emerging market and developing economies are forecast to expand by 3.4% in 2021 after contracting by 5% in 2020, according to the World Bank.
By region, real GDP growth in 2021 is projected to hit 7.4% in East Asia and Pacific, 3.3% in Europe and Central Asia, 3.7% in Latin America and the Caribbean, and 2.1% in the Middle East and North Africa. South Asia and Sub-Saharan Africa are forecast to log economic expansion of 3.3% and 2.7%, respectively.
The World Bank said the pandemic is likely to leave long-lasting adverse effects on global activity, steepen the slowdown in potential growth over the next decade, and worsen the risks associated with global debt accumulation.
"The pandemic has greatly exacerbated debt risks in emerging market and developing economies; weak growth prospects will likely further increase debt burdens and erode borrowers' ability to service debt," said Ayhan Kose, the World Bank's acting vice president for equitable growth and financial institutions.
The World Bank cited the need for policymakers to sustain economic recovery by gradually shifting to growth-enhancing policies from income support.
"In the longer run, in emerging market and developing economies, policies to improve health and education services, digital infrastructure, climate resilience, and business and governance practices will help mitigate the economic damage caused by the pandemic, reduce poverty and advance shared prosperity," the World Bank said.