World Economy to go into recession, India and China likely to be exempted: UN report

UN has released its latest trade report mentioning that the World economy will go into recession this year. Due to Coronavirus Pandemic, there will be trillions of dollars loss of global income.

The situation will create serious trouble for the developing countries but with the exception of India and China, it states the UNCTAD report. The United Nations has called for USD 2.5 trillion packages for the rescue of the developing nations where around one-third of the world’s population lives.

The speed with which the economic shockwaves due to COVID-19 Pandemic has hit the developing countries is serious even in comparison to the Global Finance Crises of 2008.

Impact of the Global Economic Recession on India and China

The report by UNCTAD states that even the world economy will go into crisis this year with the loss of trillions of dollars in global income marking a huge impact on developing countries, Indian and China are less likely to be affected. Though, the report does not provide any explanation as to why there will be an exception with these two countries. 

UNCTAD Analysis of Developing Countries

As per the analysis titled ‘The COVID-19 Shock to Developing Nations: Towards a ‘whatever it takes’ programme for the two-thirds of world’s population being left behind’ done by United Nations Conference on Trade and Development (UNCTAD), the UN trade and development body, the countries with rich commodity export will face a USD 2 Trillion to USD 3 Trillion drops in overseas investments in the next two years.

UNCTAD explains World Economy Crisis:

• As advanced economies and China are coming together with massive government packages in G-20, the announced package will extend a USD 5 trillion lifeline to their economies
• With the package, UNCTAD gives an estimation of USD 1 trillion to USD 2 trillion demand that will be injected into major G-20 economies
• Another estimation done by UNCTAD is of USD 2 trillion to USD 3 trillion financing gap that the developing countries will face
• Lack of fiscal, administrative and monetary capacity to respond to the global ongoing crisis, the impact of the pandemic and recession will be catastrophic for the developing economies

UNCTAD suggests the following measures to combat the ongoing crisis:

• USD 1 trillion liquidity injections to those who are left behind. This can be done by reallocating the existing special drawing right at IMF
• For distressed economies, a debt jubilee under which debt of one trillion dollars owed by the developing countries should be canceled for this year
• Marshall Plan of 500 billion dollars for a health recovery that will be funded from some of the missing Official Development Assistance (ODA) that was earlier promised but not delivered