Global outlook c h a p t e r 1

BOX 1.2 
Recent developments and outlook for low-income countries 
 
Note: This section was prepared by Cedric Okou and Rudi 
Steinbach. Research assistance was provided by Maria Hazel 
Macadangdang. 
The COVID-19 pandemic has dealt a devastating blow to low-income countries (LICs). Economic activity fell by 0.9 percent 
last year—the steepest decline in three decades—with an even deeper contraction among the fragile and conflict-affected LICs. As 
a result, gains in living standards have been eroded, tipping tens of millions of people into extreme poverty cumulatively in 2020-
21. The legacy of the pandemic is expected to be long-lasting. Growth among LICs is projected to average 4.3 percent in 2021-
22, well below pre-pandemic rates, with recoveries dampened in part by higher debt burdens and financial fragilities. Risks to the 
outlook for LICs are tilted firmly to the downside, and include a slower vaccine rollout, reduced development spending amid 
severely constrained fiscal space, increased inequality, and growing insecurity.

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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 
29 
Outlook 
Growth in LICs is projected to return to 3.3 percent in 
2021—well below earlier forecasts and the pre-pandemic 
average pace—before firming to 5.2 percent in 2022. The 
pickup in activity partly reflects an expected recovery in 
external demand. Despite the resumption of growth, the 
level of activity by 2022 is forecast to remain 5.2 percent 
below its pre-pandemic trend. As a result, per capita 
BOX 1.2 
Recent developments and outlook for low-income countries 
(continued)
 
incomes are projected to be lower in 2022 than the levels 
recorded in 2019 in 56 percent of LICs (figure B1.2.2.A). 
The growth forecast in LICs is based on the assumption 
that one or more approved vaccines will be widely 
distributed starting in the second half of 2021 in advanced 
economies and major EMDEs. In LICs, however, it is 
expected to only be available four quarters after the roll out 
starts in advanced economies. This group faces more