Global outlook c h a p t e r 1

A. Ratio of decline in select GDP sub-
components relative to decline in GDP
B. Demand and supply sentiments 
extracted from earning calls
C. Retail sales relative to
pre-pandemic trend in advanced 
economies
D. Advanced-economy GDP

---

C H A P T E R 1 
G L O B A L E C O N O M I C P R O S P E C T S | J A N U A R Y 2 0 2 1 
21 
the crisis accentuating preexisting vulnerabilities 
and imbalances (World Bank 2020i). 
Emerging market and 
developing economies
Activity in EMDEs fell 2.6 percent in 2020 as a 
result of the COVID-19 pandemic. Although 
aggregate EMDE growth is projected to pick up to 5 
percent in 2021 and moderate to 4.2 percent in 
2022, output will remain well below pre-pandemic 
projections throughout the forecast horizon. The 
pandemic is expected to inflict long-term damage on 
EMDE growth prospects by depressing investment 
and human capital. Progress on critical development 
goals has been set back by several years, as the 
pandemic has disproportionately affected vulnerable 
groups and is driving poverty rates sharply higher.
Recent developments
The health and economic crisis triggered by 
COVID-19 caused EMDE output to shrink an 
estimated 2.6 percent in 2020—the worst rate 
since at least 1960, the earliest year with available 
aggregate GDP data. Excluding the recovery in 
China, the contraction in EMDE output last year 
is estimated to have been 5 percent, reflecting 
recessions in over 80 percent of EMDEs—a higher 
share than during the global financial crisis, when 
activity shrank in about a third of EMDEs. The 
economies that suffered the worst declines were 
those with a heavy reliance on services and tourism 
(Cabo Verde, Maldives, Montenegro, the 
Caribbean, the Seychelles), those with large 
domestic outbreaks (Argentina, India, Mexico, 
Peru), and those that faced sharp declines in 
industrial-commodity exports due to the fall in 
external demand (Ecuador, Oman; figure 1.11.A). 
Services activity contracted last year as consumers 
shifted away from activities requiring face-to-face 
interactions amid severe and prolonged weakness 
in international travel (figure 1.11.B). In the 
average EMDE, services accounted for more than 
half of the value-added GDP prior to the 
pandemic. The relatively higher share in countries 
dependent on tourism helps to explain why they 
have experienced relatively deeper contractions 
(figure 1.11.C).
Substantial macroeconomic support helped soften 
the decline in activity. The fall in investment was