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2.1 GLOBAL MEGATRENDS
The IMF estimated that the global economy shrunk by an estimated 3.3% in 2020, the steepest peacetime economic contraction since the Great Depression of the 1930s, triggered by a global public health emergency. The COVID-19 pandemic has upended prior growth trajectories of all economies, adversely affecting households and companies across a broad range of economic sectors. Socioeconomic vulnerabilities were also exacerbated during the pandemic and development gains of the previous decades were reversed. The World Bank estimated that per capita income had fallen in more than 90% of emerging markets and developing economies (EMDEs) due to the pandemic, with losses of at least 10 years of per capita income gains expected for more than 25% of the EMDEs.
With the successes on vaccine development, moving forward, most economies are expecting a recovery in economic growth. The IMF projects the global economy to grow at an average rate of 4.0% p.a. between 2021 and 2026, with a higher average rate of 5.0% p.a. for EMDEs. In particular, ASEAN-51 is expected to remain one of the fastest growing regions in the global economy, with an average annual growth of 5.5% over the next six years2. Nevertheless, significant uncertainties remain, with the extent of the economic recovery depending in part on governments’ abilities to keep the pandemic under control, avoid pre-mature withdrawals of policy supports and minimise long-term economic scars.
Looking ahead, several relevant megatrends are expected to shape the recovery and growth of the global and Malaysian economies – some of which are pre-existing trends, which have been accelerated by the pandemic.
2.1.1 THE NEW WAVE OF CLIMATE ACTION
In 2020, the urgency for climate action was pushed to the forefront, precipitated in part by the collective global action towards combating the COVID-19 pandemic, resulting in a marked decline in worldwide emission levels during lockdowns3. Coupled with growing evidence of climate change and more in-depth research into its imminent risks, global policymakers are ever more aware of the critical need to address the immediate and longer-term systemic implications to the physical world, societies and economies.
In 2020 itself, several countries unveiled legislations to achieve net-zero emissions by 2050, while many others announced their respective net-zero environmental policy targets as part of their recovery plans. To this end, Malaysia has pledged to reduce its carbon emission intensity by 45% by 20304, relative to its 2005 levels, with a number of policies and initiatives implemented to redirect the country towards further decarbonisation.
With the election of its new president in 2021, the US rejoined the Paris Agreement. Together with the 26th United Nations Climate Change Conference (COP26) which will take place later this year, 2021 could well become a key inflection point for global climate action.
ASEAN-5 countries include Malaysia, Indonesia, Phillipines, Thailand and Vietnam.
World Economic Outlook: Managing Divergent Recoveries, IMF, April 2021.
Global Energy Review: CO2 Emissions in 2020, International Energy Agency, March 2021.
Intended Nationally Determined Contribution of the Government of Malaysia, United Nations Framework Convention On Climate Change, 2015.
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