The world economy will go into recession due to the coronavirus pandemic, with the exception of India and China, according to a latest United Nations trade report.
Two-thirds of the world living in developing countries are faced with unprecedented economic damage, United Nations Conference on Trade and Development said in its new analysis, calling for a $2.5 trillion rescue package for these nations.
According to the UNCTAD analysis, commodity-rich exporting countries will face a $2-$3 trillion drop in investments from overseas in the next two years.
Advanced economies and China have put together massive government packages which, according to the G-20, will extend a $5 trillion lifeline to their economies. “This represents an unprecedented response to an unprecedented crisis, which will attenuate the extent of the shock physically, economically and psychologically,” UNCTAD said.
While the full details of these stimulus packages are yet to be unpacked, an initial assessment by UNCTAD estimates that they will translate into $1-2 trillion injection of demand into major G-20 economies and a two percentage point turnaround in global output.
“Even so, the world economy will go into recession this year with a predicted loss of global income in trillions of dollars. This will spell serious trouble for developing countries, with the likely exception of China and the possible exception of India,” UNCTAD said. The report, however, did not give a detailed explanation as to why and how India and China will be the exceptions.
Further, given the deteriorating global conditions, fiscal and forex constraints are bound to tighten further over the course of the year. The UNCTAD estimates a $2-$3 trillion financing gap facing developing countries over the next two years.