September 22, 2020

The global economy may contract 1% or more from COVID-19, according to the UN

The global economy may contract this year by around 1%, compared to the 2.5% growth expected, as a consequence of the COVID-19 pandemic, an impact that may be even greater if the restrictions to combat the disease they are extended until the third quarter or if fiscal measures are not adequate, the United Nations warned this Wednesday.

In a report, the UN notes that a well-designed stimulus package that prioritizes health spending to curb the virus and financially supports the hardest hit households will reduce the likelihood of a deep recession.

“Urgent political measures are needed, not only to contain the pandemic and save lives, but also to protect the most vulnerable in our societies from economic ruin and support economic growth and financial stability,” Liu Zhenmin said in a statement. the head of the United Nations Department of Economic and Social Affairs.

According to the UN, movement restrictions and confinement measures are already having a very harsh effect on the economies of Europe and North America, especially in sectors such as commerce, leisure, hospitality and transport, which represent more than one fourth of the jobs.

These effects will soon spread to developing countries through trade and investment channels, with a contraction in consumption that will affect them and that will contract manufacturing production.

According to the report, in the worst case scenario the world Gross Domestic Product (GDP) would decrease by around 0.9% in 2020, compared to the 2.5% growth predicted by the UN, and the fall may be even greater if the restrictions are prolonged or if the stimulus measures are not sufficient.

As a comparison, the organization recalls that the global economy contracted 1.7% in 2009 as a result of the last great financial crisis.

The document warns that developing countries, especially those that depend on tourism and the export of raw materials, face more pronounced risks.

As a consequence, the UN warns, governments may be forced to cut their budgets at a time when it is necessary to expand them to contain the pandemic and support consumption and investment.

Meanwhile, the coronavirus is especially hitting millions of lower-income workers in the service sector, who often lack the labor protections that exist elsewhere.

Without public aid many will fall into poverty, even in the richest countries, further exacerbating the problem of inequality, the United Nations insists.

In this sense, it highlights that a large part of the population does not have the resources to stay above the poverty line for three months if they do not receive income.

As an example, he points to the cases of Italy and Spain, two of the countries hardest hit by COVID-19, where it is estimated that 27% and 40% of the inhabitants, respectively, lack savings to go three months without working.


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