Global Economic Prospects (June 2020)

The coronavirus (COVID-19) pandemic is dealing a severe blow to the global economy. Measures needed to protect public health have undercut an already fragile global economy, causing deep recessions in advanced economies and emerging market and developing economies (EMDEs) alike. EMDEs that have weak health systems; those that rely heavily on global trade, tourism, or remittances from abroad; and those that depend on commodity exports will be particularly hard-hit. For example, energy-exporting emerging market and developing economies (EMDEs) face an unprecedented public health crisis, but their fiscal positions were already strained even before the recent collapse in oil revenues. In the long-term, the pandemic will leave lasting damage in EMDEs through lower investment; erosion of physical and human capital due to closure of businesses and loss of schooling and jobs; and a retreat from global trade and supply linkages. These effects will lower potential output—the output an economy can sustain at full employment and capacity—and labor productivity well into the future.