The UN predicts global economy will suffer a 3.2% recession by 2020

The United Nations joins other global organizations in warning that 2020 will see the greatest recession since the 1930s. The UN estimates that the global economy will shrink by 3.2%, a similar estimate to that announced by the IMF last April. The forecasts offer the "worst possible scenario", which takes into account the hypothetical extension of confinement in some of the most advanced economies and a second wave of infections. In this situation the decline could reach 4.9% in 2020 and 0.5% in 2021.   

In total, the world will lose nearly $8.5 trillion in economic output over the next two years as a result of the pandemic, a setback that will virtually wipe out the gains of the previous four years, according to the UN. However, the reality may be even worse, as these forecasts are based on a scenario in which economic containment and shutdown measures do not go beyond the middle of the year and allow for a rebound in activity already during the third quarter. During the press conference, Hamid Rashid, one of the people responsible for the report, acknowledged that right now there are "clear signs" that the tougher measures against the coronavirus may be prolonged and may force a downward revision.  

The organization predicts a 5% drop in the case of developed economies. The European Union will see a fall of 5.8% in the euro zone, 5.4% in the United Kingdom, 4.8% in the United States and 4.2% in the United States and Japan. According to the UN, China -the country where the pandemic originated- will manage to close 2020 with growth, a rise of 1.7%, although far from the projections made before the crisis caused by the disease.  

The Latin American and Caribbean region will be one of the worst off, with a contraction of 5.4% overall and falls of 5.5% for South America and 5.4% for Mexico and Central America. In total, the world will lose nearly $8.5 trillion in economic output over the next two years as a result of the pandemic, a setback that will virtually wipe out the gains of the previous four years, according to the UN.  

The organization estimates that the economic rebound in 2021 will be modest in the more developed economies, with growth of 3.4%, which will barely compensate for the 2020 decline, while it will be somewhat stronger in developing economies, with progress of 5.3%. In the worst-case scenario, the United Nations believes that the global economy may contract by 4.9% in 2020 and another 0.5% in 2021 if there is a second wave of infections and the current harsh containment measures continue in the more advanced economies during the third quarter of this year.  

In either case, the pandemic will cause, according to the UN, a sharp increase in poverty. It estimates that some 34.3 million people will fall below the poverty line by 2020, more than half of them in African countries. In total, the crisis could leave 130 million more people living in extreme poverty by 2030, which would be a devastating blow to the organization's Sustainable Development Goals (SDAs). In addition, the current crisis is disproportionately affecting low-skilled and low-income workers, and threatens to further increase inequality both within and between countries. Meanwhile, jobs that require higher qualifications are being hit less hard, reports the United Nations. 

According to Rashid, there are many difficulties for a strong rebound in the economy, starting with the possibility that many businesses will not survive this phase or the limitations that may be imposed to control the pandemic and the foreseeable drop in consumption private. 

Thus, this expert predicts “a slow recovery even in a positive scenario” and warns that there may be a global increase in unemployment “permanent”. Along these lines, the United Nations analysts underscore the need for international cooperation to support the countries in greatest difficulty and call for debt relief for nations that need it, stressing that especially those that depend on raw materials and tourism will need to have "fiscal space" to be able to overcome the crisis.  

Furthermore, they warn of the risk that the large stimulus packages will contribute above all to a rapid recovery in the markets, but will neglect productive investments, which are necessary to protect and generate employment and avoid a further increase in inequality.  

The UN, in any case, recognizes the complex situation faced by governments, who are forced to combine the health and economic responses in a context where - unless there is a successful vaccine quickly - the difficulties will continue. "Governments have to contain the pandemic while minimizing its economic impact. The balance between saving lives and saving jobs is as difficult as it is necessary" United Nations chief economist Elliott Harris said at the press conference.