Amid pandemic, world economy projected to shrink 3.2% in 2020: UN

The world economy is projected to shrink by 3.2 percent in 2020 after the coronavirus pandemic sharply restricted economic activity, increased uncertainty and sparked the worst recession since the depression, the United Nations said on Wednesday.

A report by the UN Department of Economic and Social Affairs said there would likely only be a gradual recovery of lost output in 2021. In January, the department had projected world economy growth of between 1.8 to 2.5 percent this year.

"The world economy is expected to lose nearly $8.5 trillion in output in 2020 and 2021, nearly wiping out the cumulative output gains of the previous four years," the report released on Wednesday said.

The new coronavirus, which causes the respiratory illness COVID-19, has infected some 4.3 million people globally and more than 291,000 have died, according to a Reuters tally. The virus first emerged in the Chinese city of Wuhan late last year.

Businesses were shut down and hundreds of millions of people around the world were told to stay home to stop the spread as scientists rush to develop treatments and a vaccine. The UN report said the pandemic showed how economic and public health "are inextricably linked and mutually reinforcing."

"Countries may seek to reduce inter-dependence, and shorten supply chains, as many may consider the potential costs of a crippling pandemic too high relative to the benefits they receive from economic integration and interdependence," it said.

"The fight against the pandemic — if it continues for too long and its economic price becomes too high — will fundamentally reshape trade and globalisation," it added.

The report also warned that the massive loss of employment and income due to the pandemic will exacerbate global poverty.

"According to baseline estimates, 34.3 million additional people — including millions working in the informal sector — will fall below the extreme poverty line this year, with African countries accounting for 56 per cent of this increase," it said.