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World economy, except India, China, will go into recession: UN report
The world economy will go into recession this year with a predicted loss of trillions of dollars of global income due to the coronavirus pandemic, spelling serious trouble for developing countries with the likely exception of India and China, according to a latest UN trade report. With two-thirds of the world's population living in developing countries facing unprecedented economic damage from the COVID-19 crisis, the UN is calling for a USD 2.5 trillion rescue package for these nations.
According to the new analysis from United Nations Conference on Trade and Development (UNCTAD), the UN trade and development body titled "The COVID-19 Shock to Developing Countries: Towards a "whatever it takes" programme for the two-thirds of the world's population being left behind", commodity-rich exporting countries will face a USD 2 trillion to USD 3 trillion drop in investments from overseas in the next two years.
The UNCTAD said that in recent days, advanced economies and China have put together massive government packages which, according to the Group of 20 leading economies (G20), will extend a USD 5 trillion lifeline to their economies. "This represents an unprecedented response to an unprecedented crisis, which will attenuate the extent of the shock physically, economically and psychologically," it said.
It added that while the full details of these stimulus packages are yet to be unpacked, an initial assessment by the UNCTAD estimates that they will translate to a USD 1 trillion to USD 2 trillion injection of demand into the major G20 economies and a two percentage point turnaround in global output. "Even so, the world economy will go into recession this year with a predicted loss of global income in trillions of dollars. This will spell serious trouble for developing countries, with the likely exception of China and the possible exception of India," the UNCTAD said.
The report, however, did not give a detailed explanation as to why and how India and China will be the exceptions as the world faces a recession and loss in global income that will impact developing countries. Further, given the deteriorating global conditions, fiscal and foreign exchange constraints are bound to tighten further over the course of the year.
The UNCTAD estimates a USD 2 trillion to USD 3 trillion financing gap facing developing countries over the next two years. In the face of a looming financial tsunami this year, the UNCTAD proposes a four-pronged strategy that could begin to translate expressions of international solidarity into concrete action.
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