Daily Management Review

UN: Recovering economies won't make up for all the losses from the pandemic


The global economy shrank by 4.3% in the "covid" year 2020, which was the biggest decline since the Great Depression, according to a UN report on the economic outlook.

Global growth could reach 4.7% this year, with developing countries expected to recover more quickly than developed countries. UN experts expect the effects of the pandemic on the world's economies to persist for a long time to come, mainly because of the rise in unemployment and the decline in capex.

World GDP last year shrank by an estimated 4.3%, according to the UN economic outlook report. By comparison, global GDP shrank by a fraction of 1.7 percent in 2009 amid the global financial crisis, and only declined more during the Great Depression. 

Last year, output in developed countries fell by 5.6%. This year growth could reach 4%. Developing countries' GDP will shrink less in 2020, by 2.5%, but it will show more growth than in developed countries in 2021, by 5.7%, the UN said.

The report notes that the effects of the pandemic are not limited to short-term effects. In the long term, its impact on employment, productivity and potential output will persist. Without a surge in capex, the global economy is likely to face a slower growth rate. 

This will be accompanied by a contraction in the labour market. Around 420 million jobs were lost in the second and third quarters of 2020. In OECD countries, the unemployment rate rose to 8.8% in April (falling to 6.9% in November), compared with only 5.1% at the end of 2019. 

In the medium term, however, the main labour market developments will primarily relate to accelerated automation (in this way companies reduce the risks of a new wave). This will provide a short-term boost to productivity, but will then lead to a slowdown in GDP growth, the report suggests.

source: un.org