The World Bank has cut its global growth forecast for 2022 by almost a third to 2.9 percent, warning that Russia’s invasion of Ukraine has worsened the damage from the Covid-19 pandemic and many countries are now facing recession.
The war in Ukraine had compounded the slowdown in the global economy, which is now entering a “protracted period of weak growth and elevated inflation,” the World Bank said, warning that the outlook could get worse.
Bank President David Malpass said global growth could fall to 2.1 percent in 2022 and 1.5 percent in 2023, pushing per capita growth near zero if downside risks materialize should.
Mr Malpass, a former Trump administration official, said global growth was being hurt by the war, new Covid lockdowns in China, supply chain disruptions and the rising risk of stagflation – a period of weak growth and high inflation last seen in was observed in the 1970s.
“The risk of stagflation is considerable today,” wrote Mr. Malpass.
“Subdued growth is likely to continue throughout the decade due to weak investment in most parts of the world. With inflation now at multi-decade highs in many countries and supply expected to grow slowly, there is a risk that inflation will remain high for longer.”
Between 2021 and 2024, the pace of global growth is expected to slow by 2.7 percentage points, Mr Malpass said, more than double what it was between 1976 and 1979.
The report warned that the rate hikes needed to control inflation in the late 1970s were so steep that they triggered a global recession in 1982 and a series of financial crises in emerging and developing countries.
Ayhan Kose, director of the World Bank’s unit that prepares the forecast, said there was “a real risk” that a faster-than-expected tightening of financing conditions could plunge some countries into a debt crisis seen in the 1980s.
While there were similarities to conditions back then, there were also important differences, including the strength of the dollar and generally lower oil prices, as well as generally strong balance sheets at major financial institutions.
To mitigate the risks, policymakers should work to coordinate aid to Ukraine, boost food and energy production, and avoid export and import restrictions that could further increase oil and food prices.
He also called for efforts to increase debt relief and warned that some middle-income countries are potentially at risk; stepping up efforts to contain Covid; and accelerate the transition to a low-carbon economy.
The bank’s forecast for growth in 2022 is a 1.2 percentage point cut from its January forecast, and it said growth in 2023 and 2024 is likely to remain around that level.
Global inflation is likely to moderate over the next year but likely to remain above targets in many economies.
https://www.independent.ie/business/world/world-bank-slashes-its-global-growth-forecast-for-this-year-and-next-41730879.html The World Bank is lowering its global growth forecast for this year and next