The World Bank predicts that the decline in Moldova's GDP in 2020 will amount to 7.2%, and in 2021 and 2022, the growth of the Moldovan economy will amount to 3.8% and 3.7%, respectively.
This is stated in the January issue of the World Economic Outlook report published by the World Bank. The document notes that overall, the global economy is expected to grow by 4% in 2021, and the diffusion of vaccines and investment is the key to a sustainable recovery. Development risks remain, and economic activity and income indicators are likely to remain low for quite some time. WB experts emphasize that in 2021 the global economy is expected to grow by 4%, provided that the vaccination against COVID-19, which has begun, continues on a large scale throughout this year. However, the World Bank notes that the recovery is likely to be sluggish unless policymakers take decisive action to curb the pandemic and implement reforms that boost investment. WB experts point out that although the world economy, which experienced a decline of about 4.3% in 2020, is growing again today, the pandemic has caused severe damage: the number of victims and sick people is increasing, millions of people are plunged into poverty, and ahead perhaps, is a prolonged period of low indicators of economic activity and income. Curbing the spread of COVID-19 and ensuring the rapid and widespread introduction of vaccines are called priority political tasks for the near future. To support economic recovery, the authorities are also encouraged to create the conditions for a cycle of investment activities aimed at ensuring sustainable economic growth, less dependent on government borrowing. World Bank Group President David Malpass said that while the global economy appears to be entering a period of sluggish recovery, policymakers face formidable challenges in health, debt management, fiscal policy, central bank monetary policy and structural reforms that they need to address in order for this still fragile global economic recovery to gain momentum and lay the foundations for sustainable economic growth. “Dealing with the impact of the pandemic and neutralizing barriers to investment requires a determined effort to improve the business environment, make labor and product markets more flexible, and improve transparency and governance,” he said. According to the WB experts, the decline in global economic activity observed in 2020 turned out to be slightly less significant than previously predicted, mainly due to a lesser economic decline in developed countries and a more active recovery in China. At the same time, the disruption to economic activity in most emerging market and developing economies was more severe than expected. In many of these countries, measures will also need to be taken to tackle financial vulnerabilities, as a shock drop in economic growth affects the budgets of vulnerable households and companies. As noted in the WB report, forecasts for the development of the world economy for the near future remain extremely uncertain, and various scenarios are still possible in the area of economic growth. Under a pessimistic scenario of continued growth in the incidence and delays in vaccine introduction, global economic growth in 2021 could be limited to 1.6%. Herewith, under the optimistic scenario of successfully curbing the pandemic and accelerating the vaccination process, the rate of economic growth in the world could rise to almost 5%.The acting World Bank Vice President for Equitable Growth and Financial Institutions, Ayhan Kose, said the pandemic has significantly worsened debt risks in emerging and developing economies; Weak growth prospects are likely to further increase the debt burden and reduce the ability of borrowers to service debt. Therefore, the global community needs to take swift and decisive action to prevent a string of debt crises from the recent accumulation of debt. This pandemic, like other major crises of the past, is expected to have a lasting negative impact on global economic activity. It is likely to exacerbate the forecast slowdown in global growth over the coming decade, driven by underinvestment, underemployment and a shrinking workforce in many advanced economies. Historical experience suggests that the global economy will face a decade of disappointing growth performance unless policymakers implement comprehensive reforms to improve the effectiveness of the underlying drivers of equitable and sustainable economic growth. World Bank experts believe that policymakers need to make further efforts to ensure the sustainability of the recovery, making a gradual transition from a policy of income support to a policy of promoting economic growth. In the longer term, policies to improve health and education services, digital infrastructure, climate resilience, business and governance practices will help mitigate the economic damage caused by the pandemic, reduce poverty and accelerate provision overall welfare in emerging market and developing countries. Institutional reforms aimed at stimulating organic economic growth are especially important against the backdrop of a difficult fiscal position and rising debt. In the past, the return on reforms in the form of increased economic growth has prompted investors to revise their long-term growth forecasts and increase investment. To address the pandemic's financial market problems, central banks in some emerging and developing economies - often for the first time - are implementing asset buyback programs. In the early stages of the crisis, when the goal of these programs was to correct market disruptions, they appear to have helped stabilize financial markets. However, increased asset purchases to cover the budget deficit could undermine the operational independence of central banks, pose the risk of a weakening currency leading to higher inflation expectations, and heighten concerns about debt sustainability. // 05.01.2021 — InfoMarket.
