The Chinese economy is on track to grow by 8.5 percent in 2021, up 0.6 percentage point from a previous projection, the World Bank Group said in its latest Global Economic Prospects released on Tuesday.
China’s ability to contain the pandemic pretty quickly, its significant policy support, as well as the recent pickup in global trade, help support China’s strong recovery, World Bank Prospects Group Director Ayhan Kose told reporters at a press call Tuesday morning.
According to the semiannual report, the global economy is expected to expand 5.6 percent in 2021, up 1.5 percentage points from a previous projection, largely due to strong rebounds from a few major economies.
Despite the recovery, global output will be about 2 percent below pre-pandemic projections by the end of this year, the report showed. Per capita income losses will not be unwound by 2022 for about two-thirds of emerging markets and developing economies.
“While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world,” said World Bank Group President David Malpass.
“Globally coordinated efforts are essential to accelerate vaccine distribution and debt relief, particularly for low-income countries,” he said.
The World Bank chief also urged policymakers to address the pandemic’s lasting effects as the health crisis eases and take steps to spur “green, resilient, and inclusive growth” while safeguarding macroeconomic stability.
Among major economies, U.S. growth is projected to reach 6.8 percent this year, reflecting large-scale fiscal support and the easing of pandemic restrictions, according to the report. Growth in other advanced economies is also firming, but to a lesser extent.
Emerging market and developing economies as a group are forecast to expand 6 percent this year, supported by higher demand and elevated commodity prices, the report showed, while noting that recovery in many countries is being held back by a resurgence of COVID-19 cases and lagging vaccination progress, as well as the withdrawal of policy support in some instances.
Excluding China, the rebound in emerging market and developing economies is anticipated to be a more modest 4.4 percent this year, followed by 4.7 percent growth in 2022.
Even so, gains in this group of economies are not sufficient to recoup losses experienced during the 2020 pandemic-induced recession, and output in 2022 is expected to be 4.1 percent below pre-pandemic projections, the report noted.
While the global economy will see the fastest post-recession expansion pace in 80 years, growth in low-income economies this year is anticipated to be the slowest in the past 20 years other than 2020, partly reflecting the very slow pace of vaccination, according to the report.
Low-income economies are forecast to expand by 2.9 percent in 2021 before picking up to 4.7 percent in 2022. The group’s output level in 2022 is projected to be 4.9 percent lower than pre-pandemic projections.
Indermit Gill, World Bank Group vice president for Equitable Growth and Financial Institutions, said in a statement that linkages through trade and global value chains have been a vital engine of economic advancement for developing economies and lifted many people out of poverty, but at current trends global trade growth is “set to slow down over the next decade.”
“As developing economies recover from the COVID-19 pandemic, cutting trade costs can create an environment conducive to re-engaging in global supply chains and reigniting trade growth,” Gill said.
The report also argued that while global inflation is likely to continue to rise over the remainder of this year, inflation is expected to remain within target ranges in most inflation targeting countries.
“Higher global inflation may complicate the policy choices of emerging market and developing economies in coming months as some of these economies still rely on expansionary support measures to ensure a durable recovery,” Kose said.
“Unless risks from record-high debt are addressed, these economies remain vulnerable to financial market stress should investor risk sentiment deteriorate as a result of inflation pressures in advanced economies,” he added.