World Bank (WB) expects the sultanate’s Gross Domestic Product (GDP) to grow by 2 per cent in 2021 compared to a contraction of 4 per cent in 2020 due to the implications of COVID-19 pandemic and low oil prices.
In its June Global Economic Prospects report, WB pointed out that the sultanate’s GDP growth in 2021 will be the highest during the past five years. The sultanate had recorded a growth of 0.3 per cent in 2017, 1.8 per cent in 2018, and 0.5 per cent in 2019.
For the MENA region, WB expects the economic activity to shrink by 4.2 per cent in 2020, as consumption, exports, and services activity, such as tourism, are severely disrupted by the COVID-19 pandemic and, in oil exporters, export and fiscal revenues sharply fall with the plunge in oil prices. WB explained that the COVID-19 pandemic and the efforts to contain it, have weakened economic activity in the region in the short run.
‘Fiscal and monetary policy support in response to the pandemic has been swift in large regional economies. Regional growth is expected to resume in 2021 as the impact of the pandemic subsides and investment improves,’ it said.
‘The increasing reluctance of investors to bear risks led to intensified bouts of financial markets volatility and the sharp decline in oil prices and the demand for its exports in global markets led to shrinking exports of oil-producing countries. This had repercussions on the non-oil sectors while these challenges were exacerbated by several long-standing structural imbalances,’ it said.
WB also pointed out that the rapid and severe shock of the COVID-19 pandemic and the lockdown measures taken to contain it have plunged world economy in the midst of a severe contraction. According to the bank’s expectations, the global economy will witness a contraction of 5.2 per cent in 2020. This will represent the most severe recession since World War II, it said.
The report said that the economic activity in advanced economies is expected to shrink by seven per cent in 2020 due to the severe turbulences that affected the two sides of domestic demand and supply, trade and finance. It affirmed that forecasts indicate that emerging market economies and developing countries will see a contraction of 2.5 per cent in 2020, which is its first contraction as a group since at least 60 years. The average per capita income is expected to decrease by 3.6 per cent, causing millions of people to fall into extreme poverty.
“These expectations are extremely worrying, and the crisis is likely to leave long-term scars, and to create massive global challenges,” said Ceyla Pazarbasioglu, vice president for Equitable Growth, Finance and Institutions (EFI) at the World Bank Group (WBG).
“World Bank’s main concern is currently addressing the global health and economic emergency. After that, the international community must join forces to find ways to rebuild a solid recovery as possible to prevent more people from falling into poverty,” she added.