IAS Gyan

Daily News Analysis

World experiencing one of the deepest recessions since the Great Depression due to COVID-19: World Bank

15th October, 2020 Economy

Context: The world is experiencing one of the deepest recessions since the Great Depression in the 1930s owing to the novel coronavirus, World Bank.

  • It termed the COVID-19 pandemic a “catastrophic event” for many developing and the poorest countries.
  • It led to economic contraction and caused the rising risk of disruptive debt crises in countries.
  • World Bank approved the extension of the health emergency programmes to up to $12 billion for vaccines and therapeutics and distribution to extremely poor countries.

K-shaped recovery

  • The world is currently experiencing a K-shaped recovery.
  • That means that the advanced economies have been able to provide support, especially for their financial markets and for people that have jobs that can be done by working from home.
  • But people that are in the informal economy have lost their jobs, and are depending on social protection programmes.

Developing countries

  • Developing countries, especially the poorest developing countries, that downward leg in the K is an increasingly desperate recession or depression that is facing people in the poorest countries because of the loss of jobs, the loss of income, and also the loss of remittances coming from workers, working outside the country.

What needs to be done?

  • There is a need to bring flexibility in economies so that people can move to new jobs and positions, and the country can be prepared for a post-COVID-19 global economy.
  • Countries can preserve some of their core industries and businesses.
  • Countries must be encouraged to spend in the first instance on health programmes, on social programmes, and on education, one of the critical steps for countries is to reopen schools.
  • In longer-term, attention can be given to the infrastructure, which is a very important part of a country’s growth.