The International Monetary Fund (IMF) is forecasting a less severe global recession than in June but has warned the cost of the pandemic could be as high as $28trn.
Gita Gopinath, the IMF's chief economist, described the Coronavirus pandemic as the worst crisis as the worst seen since the Great Depression.
"This crisis will likely leave scars well into the medium term as labour markets take time to heal, investment is held back by uncertainty and balance sheet problems, and lost schooling impairs human capital," she said.
"It will take significant innovation on the policy front, at both the national and international levels to recover from this calamity."
The IMF said in its World Economic Outlook that a stronger-than-expected second quarter meant that global growth was now predicted to fall by 4.4% compared with a 5.2% drop forecast in June.
However, rising Covid rates in developing countries has forced it to downgrade the growth rate next year from 5.4% to 5.2%.
Global growth is expected to gradually slow to about 3.5% into the medium term.
"The cumulative loss in output relative to the pre-pandemic projected path is projected to grow from $11trn over 2020-21 to $28trn over 2020-25," said Gopinath.
"This represents a severe setback to the improvement in average living standards across all country groups."
The IMF has upgraded Britain's growth but has warned public debt will continue to grow.
The IMF has forecast that the UK economy will shrink by 9.8% this year, an improvement on the previous forecast of 10.2% in June. Out of the G7 economies only Italy is predicted to fare worse.
However, the UK economy is expected to rebound next year with growth of 5.9%.
The UK outlook could become considerably worse if it fails to strike a post-Brexit trade deal with the EU by the end of the transition period on 31 December.
The IMF noted that if the two sides fail to agree and ratify a trade deal before then, trade barriers between them are set to "rise significantly, which would increase business costs and could disrupt long-standing cross-border production arrangements".
Only Spain and Italy fared worse than the UK out of the advanced economies, with falls in output this year of 12.8% and 10.6%, respectively.
The US is expected to be the least affected of the advanced economies with growth falling by 4.3%.
Growth is forecast to be stronger in China than expected at 1.9%, rising to 8.2% next year.
The IMF said that if the second wave worsens and prospects for treatments and vaccines deteriorate, the toll on economic activity would be severely amplified by "severe financial market turmoil".
However, faster and more widespread availability of tests, treatments, vaccines, and additional policy stimulus could significantly improve outcomes.
Gopinath said governments needed to focus on providing greater support to limit economic damage from the crisis.
"Governments should continue to provide income support through well targeted cash transfers, wage subsidies, and unemployment insurance," she said.
"To prevent large scale bankruptcies and ensure workers can return to productive jobs, vulnerable but viable firms should continue to receive support—wherever possible—through tax deferrals, moratoria on debt service, and equity-like injections."