World Bank: Mongolia's GDP growth forecast to reach -0.5% in 2020

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Mongolia’s economic growth will sink below 0, reaching -0.5 percent, in 2020 before rebounding to 4.9 percent in 2021, according to World Bank forecasts.

The World Bank released its “June 2020 Global Economic Prospects” report on Monday, revising its previous growth forecasts for countries across the world as adverse global spillovers of the ongoing COVID-19 pandemic plunge the global economy. Mongolia’s 2020 forecast has been lowered by six percentage points and the 2021 outlook by 0.3 percentage points from its January projection.

The necessary but economically costly lockdowns, which were first imposed in China, have become widespread and have led to a sharp contraction of economic activity and an abrupt tightening of global financing conditions, according to the report. Regional commodity exporters – namely Mongolia, Indonesia, Malaysia, Lao, Papua New Guinea, Solomon Islands, Timor-Leste – were hit by a sharp decline in commodity prices.

In the first quarter of 2020, Mongolia’s economy is estimated to have shrank the most year-over-year in the East Asia and Pacific region. Based on estimations, Mongolia’s GDP growth hit -10.5 percent, Cambodia’s -6.8 percent, Thailand’s -1.8, and growth of the Philippines became -0.2. However, quarterly estimation was not available for some countries in the region.

The World Bank warns Mongolia about potential elevation in debt that could amplify shocks of the pandemic.

Global economy to sink into ‘worst recession’ since World War II

According to World Bank forecasts, the global economy will shrink by 5.2 percent this year.

“The COVID-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since World War II and the first output contraction in emerging and developing economies in at least the past six decades,” said World Bank Prospects Group Director Ayhan Kose. “The current episode has already seen by far the fastest and steepest downgrades in global growth forecasts on record. If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity.”

Economic activity among advanced economies is anticipated to shrink 7 percent in 2020 as domestic demand and supply, trade, and finance have been severely disrupted. Emerging market and developing economies (EMDEs) are expected to shrink by 2.5 percent this year, their first contraction as a group in at least sixty years. Per capita incomes are expected to decline by 3.6 percent, which will tip millions of people into extreme poverty this year. Interruptions in schooling and primary healthcare access are most likely to have lasting impacts on human capital development.

“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions Ceyla Pazarbasioglu. “Our first order of business is to address the global health and economic emergency. Beyond that, the global community must unite to find ways to rebuild as robust a recovery as possible to prevent more people from falling into poverty and unemployment.”

Under the baseline forecast — which assumes that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in EMDEs, that adverse global spillovers ease during the second half of the year, and that dislocations in financial markets are not long-lasting — global growth is forecast to rebound to 4.2 percent in 2021, as advanced economies grow 3.9 percent and EMDEs bounce back by 4.6 percent. However, the outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages. A downside scenario could lead the global economy to shrink by as much as 8 percent this year, followed by a sluggish recovery in 2021 of just over 1 percent, with output in EMDEs contracting by almost 5 percent this year.

The World Bank highlighted the importance for emerging market and developing economies, which are particularly vulnerable, to strengthen public health systems, address challenges posed by informality and limited safety nets, and enact reforms to generate strong and sustainable growth once the crisis passes.

Regional Outlooks

  • East Asia and Pacific: Growth in the region is projected to fall to 0.5 percent in 2020, the lowest rate since 1967, reflecting disruptions caused by the pandemic.
  • Europe and Central Asia: The regional economy is forecast to contract by 4.7 percent, with recessions in nearly all countries.
  • Latin America and the Caribbean: The shocks stemming from the pandemic will cause regional economic activity to plunge by 7.2 percent in 2020.
  • Middle East and North Africa: Economic activity in the Middle East and North Africa is forecast to contract by 4.2 percent as a result of the pandemic and oil market developments.
  • South Asia: Economic activity in the region is projected to contract by 2.7 percent in 2020 as pandemic mitigation measures hinder consumption and services activity and as uncertainty about the course of the pandemic chills private investment.
  • Sub-Saharan Africa: Economic activity in the region is on course to contract by 2.8 percent in 2020, the deepest on record.

Dulguun Bayarsaikhan