Global outlook c h a p t e r 1

particularly LICs—and provide much-needed 
fiscal resources to support social protection 
programs. More broadly, deeper global collabo-
ration will be needed to develop equitable and 
sustainable solutions to the world’s most pressing 
long-term challenges, including tackling climate 
change and eliminating extreme poverty. 
Global context 
COVID-19 has continued to spread around the 
world, resulting in the re-imposition of lockdown 
measures and a slowdown in the pace of the recovery. 
Although global trade in goods has largely rebounded, 
trade in services remains feeble. Global financial 
conditions are being supported by monetary policy 
accommodation, but financial systems in many 
countries are showing signs of underlying strain. 
Whereas most commodity prices, particularly those of 
metals, rebounded in the second half of the year as 
demand firmed, the recovery in oil prices has been 
more modest. 
Pandemic developments
COVID-19 continued to spread in the second half 
of 2020, with steady increases in confirmed cases 
in some countries and renewed outbreaks in others 
(figures 1.3.A and 1.3.B). In recent months, 
advanced economies—particularly the United 
States and several euro area countries—have 
accounted for an increasing share of cases; in 
EMDEs, outbreaks in the South Asia, Latin 
America and the Caribbean, and Europe and 
Central Asia regions have continued to grow. 
Deaths from COVID-19 in Sub-Saharan Africa 
have remained low despite fears that limited 
healthcare capacity made it vulnerable, reflecting 
its young population (WHO 2020). High positive 
test rates in some countries and evidence from 
antibody tests suggest the virus is far more 
prevalent than indicated by confirmed cases 
(figure 1.3.C). 
Growing 
outbreaks 
have 
forced 
many 
governments to maintain or reintroduce some 
lockdown measures (figure 1.3.D). Nonetheless, 
pandemic-control measures have become better 
targeted and less economically disruptive. For 
example, extensive mask usage appears to be a 
minimally disruptive way of slowing the spread of 

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Comprehensive Economic Partnership, higher 
tariffs on U.S.-China trade remain in effect, and 
there has been little recent progress toward “deep” 
trade agreements that foster broader economic 
integration (Mattoo, Rocha, and Ruta 2020; 
World Bank 2020a). Trade policy uncertainty has 
fallen from its highs in 2019 but is still above 
historic norms, in part due to the potential of 
renewed trade tensions between major economies.
The recently announced Brexit deal between the 
United Kingdom and the European Union is 
the virus, and some countries that adopted 
widespread test-and-trace policies have suffered 
fewer health and economic consequences (Konda 
et al. 2020; Schünemann et al. 2020).
Several vaccine candidates are in development, and 
some have already been used in countries such as 
the Russian Federation and China. With the 
completion of some Phase 3 trials, vaccination has 
begun in a number of advanced economies. A 
more general rollout of several effective vaccines is 
envisioned to proceed in early 2021 in advanced 
economies and major EMDEs, starting with 
vulnerable populations. It is expected that the 
vaccine rollout will be considerably slower in other 
EMDEs and LICs as a result of difficulties with 
procurement and distribution. 
Global trade 
Global trade collapsed last year as border closures 
and supply disruptions interrupted the interna-
tional provision of goods and services. Goods 
trade fell more rapidly and recovered more swiftly 
than during the global financial crisis, while 
services trade remains depressed (figure 1.4.A). 
Relative strength in manufacturing, alongside 
persistent weakness in services, reflects the unusual 
nature of the recession, which has shifted 
consumption patterns toward goods and away 
from services requiring face-to-face interactions 
(figure 1.4.B). The recovery in global merchandise 
trade has also benefited from the resilience of 
global value chains to supply disruptions (Hyun, 
Kim, and Shin 2020).
Continued impediments to international travel 
and tourism are contributing to persistent 
weakness in services. International travel has 
recovered from its April trough but has stabilized 
far below pre-pandemic levels (figure 1.4.C). In 
the decade following the global financial crisis, 
rising trade intensity of global activity was almost 
entirely driven by trade in services (figure 1.4.D). 
The same is unlikely to be the case in the current 
recovery, as services will struggle to rebound until 
countries loosen international travel restrictions.
Although there have been some steps toward trade 
liberalization, such as the African Continental
Free Trade Area agreement and the Regional