Global Economic Prospects, June 2021 - World Bank

1 A World bank Group Flagship Report30thanniversary editionGlobal Economic prospects JUNE 2021 Global Economic prospects JUNE 2021 Global Economic prospects 2021 International bank for Reconstruction and Development / The World bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: Some rights reserved 1 2 3 4 24 23 22 21 This work is a product of the staff of The World bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World bank , its Board of Executive Directors, or the governments they represent. The World bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth.

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5 The cutoff date for the data used in this report was June 2, 2021. v Summary of Contents Chapter 1 Chapter 2 Chapter 3 Chapter 4 Global Outlook .. 1 Box What is next? Growth scenarios beyond 2021 .. 9 Box Regional perspectives: Recent developments and outlook ..25 Box Recent developments and outlook for low-income countries ..30 Regional 57 East Asia and Europe and Central Asia ..65 Latin America and the Caribbean ..73 Middle East and North Africa ..81 South Asia ..87 Sub-Saharan High Trade Costs: Causes and Remedies ..103 Box Understanding the determinants of trade costs .. 112 Emerging Inflation Pressures: Cause for Alarm? ..129 Box Inflation during Global 137 Box Food price volatility and inflation in low-income countries .. 144 Statistical Appendix .. 161 Selected Topics .. 168 Acknowledgments.

6 Xiii Foreword .. xv Executive Summary .. xvii Abbreviations .. xix vii Contents Chapter 1 Global Outlook .. 1 Summary .. 3 Global 7 Pandemic developments .. 7 Global trade .. 8 Financial markets .. 16 Commodity markets .. 17 Major economies: Recent developments and outlook .. 18 United States .. 18 Euro area .. 19 Japan .. 19 China .. 20 Emerging market and developing economies .. 20 Recent developments .. 20 Outlook .. 21 Per capita income growth and poverty .. 24 Global outlook and risks .. 27 Global outlook .. 27 Risks to the 29 Policy 37 Key Global challenges .. 38 Challenges in advanced economies .. 38 Challenges in emerging market and developing economies .. 40 References .. 48 Acknowledgments .. xiii Foreword .. xv Executive Summary .. xvii Abbreviations .. xix Regional Outlooks .. 57 East Asia and Pacific.

7 59 Recent developments .. 59 Chapter 2 viii Outlook .. 60 Risks .. 62 Europe and Central Asia .. 65 Recent 65 Outlook .. 66 Risks .. 69 Latin America and the Caribbean .. 73 Recent 73 Outlook .. 74 Risks .. 76 Middle East and North Africa .. 81 Recent 81 Outlook .. 82 Risks .. 84 South Asia .. 87 Recent 87 Outlook .. 88 Risks .. 90 Sub-Saharan Africa .. 93 Recent 93 Outlook .. 94 Risks .. 96 References .. 100 Chapter 2 Chapter 3 High Trade Costs: Causes and Remedies .. 103 105 prospects for trade growth .. 107 Patterns in trade costs .. 109 Correlates of trade costs .. 111 Policies to lower trade costs .. 118 At-the-border measures .. 119 Between-the-border measures .. 120 Behind-the-border measures .. 120 Comprehensive reform packages .. 121 123 References .. 124 ix Chapter 4 Emerging Inflation Pressures: Cause for Alarm?

8 129 Introduction ..131 Global inflation before the pandemic ..134 Inflation during the pandemic ..134 Drivers of inflation during the pandemic ..135 Relative importance of drivers of inflation ..141 prospects for inflation ..142 Short-term inflation prospects ..142 Longer-term inflation prospects ..149 Policy implications ..151 Annex Methodology and database ..152 References ..156 Statistical Appendix .. 199 Data and Forecast Conventions .. 205 Selected Topics .. 206 Box What is next? Growth scenarios beyond 2021 .. 9 Box Regional perspectives: Recent developments and outlook .. 25 Box Recent developments and outlook for low-income countries .. 30 Box Understanding the determinants of trade costs .. 112 Box Inflation during Global 137 Box Food price volatility and inflation in low-income countries.

9 144 Boxes Global prospects .. 5 Global risks and policy challenges .. 6 Pandemic developments .. 8 Policy support and vulnerabilities .. 10 Global recovery in historical context .. 12 Alternative scenarios for Global growth .. 13 Global recovery scenarios in historical context .. 15 Global trade .. 16 Global finance .. 17 Commodity markets .. 18 Advanced economies .. 19 China .. 20 Figures x Recent developments in emerging market and developing economies .. 21 Recent developments in emerging market and developing economies, excluding China .. 22 prospects for growth in emerging market and developing economies .. 23 Long-term outlook in emerging market and developing economies .. 24 Regional growth .. 26 Poverty and per capita income in emerging market and developing 27 Global outlook and risks.

10 28 Downside risk: Continued COVID-19 flare-ups and new variants .. 29 Recent developments .. 31 Outlook .. 32 Risks .. 34 Downside risk: Financial market stress .. 35 Downside risk: Corporate defaults and deleveraging .. 36 Upside risk: Rapid end of the pandemic at the Global 37 Upside risk: Sustained, broad-based Global upturn .. 37 Monetary, financial, and fiscal policies in advanced economies .. 39 Structural policies in advanced economies .. 40 Monetary and financial policies in 42 Fiscal policy in emerging market and developing economies .. 43 Structural policies in emerging market and developing economies .. 45 China: Recent 60 EAP: Recent developments .. 61 EAP: Outlook .. 62 EAP: Risks .. 63 ECA: Recent developments.