Global outlook c h a p t e r 1

Summary 
 
COVID-19 caused a global recession whose depth 
was surpassed only by the two World Wars and 
the Great Depression over the past century and a 
half. Although global economic activity is growing 
again, it is not likely to return to business as usual 
for the foreseeable future. The pandemic has 
caused a severe loss of life, is tipping millions into 
extreme poverty, and is expected to inflict lasting 
scars that push activity and income well below 
their pre-pandemic trend for a prolonged period.
The incipient recovery was initially supported by a 
partial easing of stringent lockdowns. Various 
restrictive measures have been reintroduced, 
however, as COVID-19 has continued to spread 
around the world. Some areas have experienced a 
sharp resurgence of infections, and daily new cases 
remain high (figure 1.1.A). That said, there has 
been substantial progress in the development of 
effective vaccines, and inoculation has begun in 
some countries. A more general rollout in 
advanced economies and major emerging market 
and developing economies (EMDEs) is expected 
to proceed early this year. Most other EMDEs, 
however, face greater constraints in vaccine 
procurement and distribution. Until vaccines are 
widely distributed, effective containment strategies 
to limit the spread of COVID-19 remain critical. 
Following the initial rebound in mid-2020, the 
global economic recovery has slowed (figure 
1.1.B). Whereas activity and trade in the goods 
sector have improved, the services sector remains 
anemic, with international tourism, in particular, 
still depressed. The fall in global investment has 
been pronounced, particularly for EMDEs 
excluding China (figure 1.1.C). Even though 
financial conditions remain very loose, reflecting 
exceptional monetary policy accommodation, 
underlying financial fragilities are mounting. Most 
commodity prices rebounded from their mid-
2020 lows as strict lockdowns were gradually lifted 
and demand firmed, especially from China; 
however, the recovery in oil prices was more 
modest amid concerns over the pandemic’s lasting 
impact on oil demand. 
In all, the global economy is estimated to have 
contracted 4.3 percent in 2020—a 0.9 percentage 
point smaller collapse than was expected in June 
forecasts (figure 1.1.D). In advanced economies, 
the initial contraction was less severe than 
anticipated, but the ensuing recovery has been 
dampened by a substantial resurgence of COVID-
19 cases. Meanwhile, output in China is estimated 
Note: This chapter was prepared by Carlos Arteta, Justin-
Damien Guénette, Patrick Kirby, and Collette Mari Wheeler, with 
contributions from Rudi Steinbach, John Baffes, Osamu Inami, 
Sergiy Kasyanenko, Gene Kindberg-Hanlon, Peter Nagle, Cedric 
Okou, Franz Ulrich Ruch, and Ekaterine Vashakmadze. Research 
assistance was provided by Damien M. V. Boucher, Hrisyana 
Doytchinova, Fuda Jiang, Maria Hazel Macadangdang, Julia 
Roseman Norfleet, Ipek Ceylan Oymak, Vasiliki Papagianni, Shijie 
Shi, Kaltrina Temaj, Jinxin Wu, and Juncheng Zhou.

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C H A P T E R 1 
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