The United Nations warned Wednesday that the global financial fallout from the coronavirus pandemic could see economic output plummet by $8.5 trillion over the next two years and push more than 34 million people into extreme poverty.
“We are now facing the grim reality of a severe recession — one of a magnitude not seen since the Great Depression,” said the U.N.’s top economist, Elliott Harris, referencing the global economic depression that began in the United States in 1929 and spread across the globe for several years.
In its “World Economic Situation and Prospects” midyear report, the United Nations forecast that the global economy would shrink by 3.2% in 2020 and make only a modest rebound next year. World trade is expected to fall by 15%. Total losses of $8.5 trillion in 2020-21 means nearly all the gains of the past four years will be erased.
“The twin health and economic crises present very difficult policy trade-offs,” Harris said. He emphasized that governments needed to contain the spread of the pandemic while simultaneously minimizing its economic impacts.
“The balance between saving lives and saving jobs is as difficult as it is necessary to strike,” he added.
As of early Wednesday evening EDT, more than 4.3 million people worldwide had been diagnosed with COVID-19, the disease caused by the coronavirus, and nearly 300,000 had died, according to statistics from Johns Hopkins University.
While the pandemic has halted activity in many developed economies, Harris said poorer countries had yet to feel the full force of the virus but were suffering economically because of their links with developed countries.
He noted that commodity and tourism sectors had taken a major hit, along with transportation and manufacturing sectors, turning millions jobless across the planet in a matter of weeks.
“In both developed and developing countries, many are at risk of falling into poverty, with our most pessimistic scenario projecting an additional 160 million people living in poverty by 2030,” Harris told reporters.
More than 34 million of them will likely fall below the international poverty line by the end of this year. Those are individuals living on less than $1.90 a day. African countries are forecast to be especially hard hit, accounting for more than half that number.
“The world will face a ‘new normal’ after the COVID-19 crisis,” said Hamid Rashid, chief of the Global Economic Monitoring Branch and lead author of the report. “Unless there are convincing breakthroughs in a vaccine and treatment of the disease, we will face a new normal of prolonged economic slump — low growth, low global trade flows, low investment and low economic activities.”
He said that consumption and production patterns might fundamentally change, and that automation and digitization would accelerate, which could lead to permanent unemployment for some workers.
While many countries have implemented fiscal stimulus packages to prop up their economies, it has been uneven. In rich countries, measures have been the equivalent of 10% of GDP, while in poor ones, it is 0.5% to 1%.
Many developing countries were already struggling before the pandemic, with deficits and debt financing, which is now affected by falling revenue from exports and tourism and decreasing remittances from expatriates. The report said more international support was needed.
While the news was mostly bad, the report’s author said how the world structured its recovery would be crucial.
“The current crisis offers an opportunity to build resilience against economic shocks and future pandemics, to strengthen social protection, to reduce inequality and address growing climate risks,” Rashid said.