Washington: The World Bank has sharply downgraded its outlook for the global economy, pointing to Russia’s war against Ukraine, the prospect of widespread food shortages and concerns about the potential return of “stagflation” a toxic mix of high inflation and sluggish growth unseen for more than four decades.
The 189-country anti-poverty agency predicted on Tuesday that the world economy will expand 2.9 percent this year.
That would be down from 5.7 percent global growth in 2021 and from the 4.1 percent it had forecast for 2022 back in January.
“For many countries, the recession will be hard to avoid,” said David Malpass, the World Bank’s president.
The agency doesn’t foresee a much brighter picture in 2023 and 2024: It predicts just 3 percent global growth for both years.
For the United States alone, the World Bank has slashed its growth forecast to 2.5 percent this year from 5.7 percent in 2021 and from the 3.7 per cent it had forecast in January.
For the 19 European countries that share the euro currency, it downgraded the growth outlook to 2.5% this year from 5.4% last year and from the 4.2 per cent it had expected in January.
In China, the world’s second-biggest economy after the United States, the World Bank expects growth to slow to 4.3 per cent from 8.1 percent last year. China’s zero-COVID policies, involving draconian lockdowns in Shanghai and other cities, brought economic life to a standstill. The Chinese government is providing aid to ease the economic pain.
Emerging market and developing economies are collectively forecast to grow 3.4 percent this year, decelerating from a 6.6% pace in 2021.
Russia’s invasion of Ukraine has severely disrupted global trade in energy and wheat, battering a global economy that had been recovering robustly from the coronavirus pandemic. Already-high commodity prices have gone even higher as a result, threatening the availability of affordable food in poor countries.
“There’s a severe risk of malnutrition and of deepening hunger and even of famine,” Malpass warned.
The World Bank expects oil prices to surge 42 per cent this year and for non-energy commodity prices to climb nearly 18 percent . But it foresees oil and other commodity prices both dropping 8 in 2023. It likened the current spike in energy and food prices to the oil shocks of the 1970s.
“Additional adverse shocks,” the agency warned in its new Global Economic Prospects report, “will increase the possibility that the global economy will experience a period of stagflation reminiscent of the 1970s.” AP