What’s in the news?

• The World Bank has released its Global Economic Prospects (GEP) June 2020 report.

Highlights of the report

• The Indian economy is expected to contract by 3.2% in this fiscal year as a result of the COVID-19 pandemic and its associated restrictions.
• The world economy, as a whole, is set to witness its deepest recession since World War II, with a forecasted contraction of 5.2% this year.
• The World Bank also warned that around 70-100 million people could be pushed into extreme poverty.
• Countries most reliant on global trade, tourism, external financing and commodity exports are likely to be hit the hardest.

Growth rebound

• Global growth is set to rebound at 4.2% in 2021, with Emerging market and developing economies (EMDEs) growing at 4.6% and advanced economies growing at 3.9%. This, however, is the baseline forecast and assumes that pandemic-induced domestic restrictions will be lifted by mid-year in advanced economies and a bit later in EMDEs.
• India is forecast to see some recovery next year and grow at 3.1%.

Related information

Recession vs Slow down

• Recession- Drop in the GDP
• Slow down- Decline in the growth rate of the GDP
• An economic recession signifies a shrinkage in the GDP for two or more consecutive quarters, while an economic slowdown is when the GDP continues to grow but at a slower rate than the previous period in question. A slowdown is a pointer towards recession and usually precedes one but does not necessarily lead to recession.
• Recession means that the country is producing and earning less than what it did before. Consumers tend to spend less as people lose confidence in the growth of the economy. Less spending means that there’s a decrease in demand, which, in turn leads to a dip in production. Such events also lead to lay-offs and job loss and mark a spike in unemployment.
• Slowdown, on the other hand, means that production and earnings of the economy is not growing at the same pace as before.

References:

https://www.thehindu.com/business/Economy/economy-to-contract-by-32-this-fiscal/article31780790.ece

https://economictimes.indiatimes.com/news/economy/indicators/indias-economy-to-contract-by-3-2-per-cent-in-fiscal-year-2020-21-world-bank/articleshow/76266999.cms