The CCP Virus pandemic will have a serious impact on China, possibly causing the economy to come to a standstill and it may drive up to 11 million more people into poverty, according to a new report by the World Bank.
In the East Asia and Pacific Update released on Monday, March 30, the World Bank predicted that China’s economic growth could fall sharply to 2.3% in the baseline scenario in 2020, from 6.1% in 2019.
In the bottom-end scenario, the world’s second largest economy is forecast to grow only 0.1% this year.
Two months ago, World Bank’s economists forecast China would grow 5.9% this year, which would be its worst performance since 1990.
The World Bank said that the CCP Virus has triggered a supply shock in China and caused a global shock, and the developing economies in East Asia and the Pacific (EAP) now face the prospect of a global financial shock and recession.
Growth in East Asia and the Pacific
The growth in the rest of the developing EAP region is projected to slow to 1.3% in the baseline and to negative 2.8% in that bottom-end scenario in 2020, from an estimated 4.7% in 2019.
According to the World Bank, “most vulnerable are countries that have poor disease control and prevention systems; that rely heavily on trade, tourism, and commodities; that are heavily indebted; and that rely on volatile financial flows.”
The CCP Virus shock will also have an adverse impact on poverty. The World Bank’s report estimates that under the baseline growth scenario, nearly 24 million fewer people in the region will escape poverty in 2020 than would have in the absence of the pandemic (using a poverty line of $5.50/day).
If the economic situation was to deteriorate further, and the lower-case scenario prevails, then poverty is estimated to increase by about 11 million people. Prior projections estimated that nearly 35 million people would escape poverty in the EAP region in 2020, including over 25 million in China alone.
“Countries in East Asia and the Pacific that were already coping with international trade tensions and the repercussions of the spread of COVID-19 in China are now faced with a global shock,” said Victoria Kwakwa, vice president for EAP at the World Bank.
“The good news is that the region has strengths it can tap, but countries will have to act fast and at a scale not previously imagined,” she said.
Aaditya Mattoo, chief economist for EAP at the World Bank, said that the regional countries must fight this disease together, keep trade open, and coordinate macroeconomic policy.