The COVID-19 pandemic has spread with alarming speed, infecting millions and bringing economic activity to a near-standstill as countries imposed tight restrictions on movement to halt the spread of the virus. As the health and human toll grows, the economic damage is already evident and represents the largest economic shock the world has experienced in decades.
The pandemic is expected to plunge most countries into recession in 2020, with per capita income contracting in the largest fraction of countries globally since 1870. Advanced economies are projected to shrink 7 percent. That weakness will spill over to the outlook for emerging market and developing economies, who are forecast to contract by 2.5 percent as they cope with their own domestic outbreaks of the virus. This would represent the weakest showing by this group of economies in at least sixty years.
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Every region is subject to substantial growth downgrades. East Asia and the Pacific will grow by a scant 0.5%. South Asia will contract by 2.7%, Sub-Saharan Africa by 2.8%, Middle East and North Africa by 4.2%, Europe and Central Asia by 4.7%, and Latin America by 7.2%. These downturns are expected to reverse years of progress toward development goals and tip tens of millions of people back into extreme poverty.
Emerging market and developing economies will be buffeted by economic headwinds from multiple quarters: pressure on weak health care systems, loss of trade and tourism, dwindling remittances, subdued capital flows, and tight financial conditions amid mounting debt. Exporters of energy or industrial commodities will be particularly hard hit. The pandemic and efforts to contain it have triggered an unprecedented collapse in oil demand and a crash in oil prices. Demand for metals and transport-related commodities such as rubber and platinum used for vehicle parts has also tumbled. While agriculture markets are well supplied globally, trade restrictions and supply chain disruptions could yet raise food security issues in some places.
Even this bleak outlook is subject to great uncertainty and significant downside risks. The forecast assumes that the pandemic recedes in such a way that domestic mitigation measures can be lifted by mid-year in advanced economies and later in developing countries, that adverse global spillovers ease during the second half of 2020, and that widespread financial crises are avoided. This scenario would envision global growth reviving, albeit modestly, to 4.2% in 2021.
However, this view may be optimistic. Should COVID-19 outbreaks persist, should restrictions on movement be extended or reintroduced, or should disruptions to economic activity be prolonged, the recession could be deeper. Businesses might find it hard to service debt, heightened risk aversion could lead to climbing borrowing costs, and bankruptcies and defaults could result in financial crises in many countries. Under this downside scenario, global growth could shrink by almost 8% in 2020.
Looking at the speed with which the crisis has overtaken the global economy may provide a clue to how deep the recession will be. The sharp pace of global growth forecast downgrades points to the possibility of yet further downward revisions and the need for additional action by policymakers in coming months to support economic activity.
A particularly concerning aspect of the outlook is the humanitarian and economic toll the global recession will take on economies with extensive informal sectors that make up an estimated one-third of the GDP and about 70% of total employment in emerging market and developing economies. Policymakers must consider innovative measures to deliver income support to these workers and credit support to these businesses.
Another important feature of the current landscape is the historic collapse in oil demand and oil prices. Low oil prices are likely to provide, at best, temporary initial support to growth once restrictions to economic activity are lifted. However, even after demand recovers, adverse impacts on energy exporters may outweigh any benefits to activity in energy importers. Low oil prices offer an opportunity to oil producers to diversify their economies. In addition, the recent oil price plunge may provide further momentum to undertake energy subsidy reforms and deepen them once the immediate health crisis subsides.
In the face of this disquieting outlook, the immediate priority for policymakers is to address the health crisis and contain the short-term economic damage. Over the longer term, authorities need to undertake comprehensive reform programs to improve the fundamental drivers of economic growth once the crisis lifts.
Policies to rebuild both in the short and long-term entail strengthening health services and putting in place targeted stimulus measures to help reignite growth, including support for the private sector and getting money directly to people. During the mitigation period, countries should focus on sustaining economic activity with support for households, firms and essential services.
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Global water scarcity is a leading challenge for continued human development and achievement of the Sustainable Development Goals1,2. While water scarcity is often understood as a local river basin problem, its drivers are often global in nature3. For instance, agricultural commodities (the primary source of global water consumption4), are often traded and consumed outside the regions they are produced5. These economic trade connections mean that global changes in consumption result in impacts on local water systems6. Likewise, local water system shocks can also propagate globally7,8. Water is a critical input to other sectors, such as energy, transportation, and manufacturing9,10, so that changes in the regional water supply or sectoral demand can propagate across sectors and scales. Continued population growth, climate change, and globalization ensure that these multi-region, multi-sector dynamics will become increasingly important to our understanding of water scarcity drivers and impacts11.
From the economic perspective, water scarcity impacts arise when the difficulty of obtaining water forces a change in consumption. For instance, abundant snowmelt may be of little use to would-be farmers if barriers (cost, institutional, etc.) prevent them from utilizing it. They will be forced to go elsewhere for water or engage in other activities, and this bears an economic cost that is not reflected in conventional water scarcity metrics. When water becomes a binding constraint, societies adapt through trade and shifting patterns of production, and the cost of that adaptation is tied to the difficulty of adopting needed changes. Changing annual cropping patterns to conserve water is easier and will impact an economy less than shuttering thermal power generation during prolonged drought19. In a globalized economy, the impact of such adaptation cannot be assessed in a single basin or sector in isolation, as hydrologic changes in one region reverberate across sectors around the world3,22. Indeed, reductions in water supply in one region may increase demands for water in another, simultaneously inducing both physical scarcity and economic benefit in ways that are difficult to anticipate ex ante23. Our primary research question is how these dynamics will impact society in the future, and how both the magnitude and direction of those impacts depend on future deeply uncertain conditions24.
Global water scarcity studies depend on long-term projections of climate, population growth, technology change, and other factors that are deeply uncertain, meaning that neither the appropriate distribution nor the correct systems model is agreed upon24,30. Complicating matters, the coupled human-earth system is complex, exhibiting nonlinearities and emergent properties that make it difficult to anticipate important drivers in the scenario selection process. In such a case, focusing on a few scenarios, as is common in water scarcity studies, risks missing key drivers and their interactions31. In contrast, recent studies advocate exploratory modeling32 to identify important global change scenarios33,34. In that approach, the uncertainty space is searched broadly and coupled-systems models are used to test the implications of different assumptions on salient measures of impact across a scenario ensemble35. Exploratory modeling is especially important in long-term water scarcity studies, where we show that meaningful scenarios vary widely from basin-to-basin, highlighting the inadequacy of relying on a few global narrative scenarios.
We calculate both physical water scarcity (Fig. 1B) and its economic impact (Fig. 1C) over the 21st century for 235 river basins for each of the 3000 global change scenarios, simulated using the Global Change Analysis Model (GCAM) integrated assessment model36. With the effects of inter-basin trade, hydrologic basins may experience highly positive or highly negative economic impact due to water scarcity (Fig. 1A). Here, economic impact is defined as the difference in total surplus in water markets (Supplementary Fig. 1) between a control scenario with unlimited water and an experimental scenario with limited water supply (Supplementary Fig. 2). Water scarcity usually induces negative economic impact (loss of surplus), although positive economic impact from global water scarcity can arise if a basin holds a comparative advantage over others. With this comparative advantage, a basin can become a virtual water exporter through inter-basin trade37, meaning it will export water-embedded goods to other regions. Though some basins experience positive impact more often than others (across the scenario ensemble), all basins experience both negative and positive impacts in some scenarios (Supplementary Table 1): no basin has a universally positive or negative outlook. As may be expected, the basins with the highest number of positive impact scenarios are those that are relatively water-rich by conventional measures (Fig. 1B), for example, the Orinoco River in northern South America (Fig. 1A). 152ee80cbc
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