According to the report, both rich and poor countries would be hit by the growth slowdown, but developing and emerging market economies are the most vulnerable. Growth in advanced economies was forecast to decline from 5.1% to 2.6% this year, while in emerging and developing countries it is expected to drop from 6.6% to 3.4%.
World Bank issues grim economic forecast
The World Bank (WB) has cut its global growth projection for this year from 4.1% to 2.9%, warning that many countries are likely to face recession.
“Amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022,” the Tuesday press release said.
“Several years of above-average inflation and below-average growth are now likely, with potentially destabilizing consequences for low- and middle-income economies. It’s a phenomenon – stagflation – that the world has not seen since the 1970s.”
According to WB President David Malpass, “for many countries, recession will be hard to avoid.”
The institution said that after halving from 5.7% in 2021, growth would be stuck at 3% in both 2023 and 2024 as the Russia-Ukraine conflict affected investment and trade, the pent-up demand from the pandemic faded, and policy support was withdrawn.
The report highlighted that the slowdown in growth between 2021 and 2024 was on course to be twice that of the period between 1976 and 1979. The recovery from the stagflation of the 1970s required steep increases in interest rates in the West, it said. Those “played a prominent role in triggering a string of financial crises in emerging market and developing economies.”
According to the report, both rich and poor countries would be hit by the growth slowdown, but developing and emerging market economies are the most vulnerable. Growth in advanced economies was forecast to decline from 5.1% to 2.6% this year, while in emerging and developing countries it is expected to drop from 6.6% to 3.4%.
“Just over two years after Covid-19 caused the deepest global recession since World War II, the world economy is again in danger … Even if a global recession is averted, the pain of stagflation could persist for several years – unless major supply increases are set in motion,” said the report."
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World Bank warns global economy may suffer 1970s-style stagflation
Risks of further deterioration are mounting
The global economy may be headed for years of weak growth and rising prices, a toxic combination that will test the stability of dozens of countries still struggling to rebound from the pandemic, the World Bank warned Tuesday.
Not since the 1970s — when twin oil shocks sapped growth and lifted prices, giving rise to the malady known as “stagflation” — has the global economy faced such a challenge.
The bank slashed its annual global growth forecast to 2.9 percent from January’s 4.1 percent and said that “subdued growth will likely persist throughout the decade because of weak investment in most of the world.”
Fallout from Russia’s invasion of Ukraine has aggravated the global slowdown by driving up prices for a range of commodities, fueling inflation. Global growth this year will be roughly half of last year’s annualized rate and is expected to show little improvement in 2023 and 2024.
This will be the sharpest slump after an initial post-recession rebound that the global economy has suffered in more than 80 years, the bank said. And the situation could get even worse if the Ukraine war fractures global trade and financial networks or soaring food prices spark social unrest in importing countries.
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