The World Bank on Tuesday slashed its global growth forecast and warned that many countries could fall into recession as the economy slips into a period of stagflation reminiscent of the 1970s.
Global economic expansion is expected to drop to 2.9% this year from 5.7% in 2021 — 1.2 percentage points lower than the 4.1% predicted in January, the Washington-based bank said in its latest Global Economic Prospects report.
Growth is expected to then hover around that level through 2023 to 2024 while inflation remains above target in most economies, the report said, pointing to stagflation risks.
Russia’s invasion of Ukraine and the resultant surge in commodity prices have compounded existing Covid pandemic-induced damage to the global economy, which the World Bank said is now entering what may be “a protracted period of feeble growth and elevated inflation.”
“The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, the recession will be hard to avoid,” World Bank President David Malpass.
Growth in advanced economies is projected to decelerate sharply to 2.6% in 2022 from 5.1% in 2021 before further moderating to 2.2% in 2023, the report said.
Expansion in emerging markets and developing economies, meanwhile, is projected to fall to 3.4% in 2022 from 6.6% in 2021, well below the annual average of 4.8% from 2011 to 2019.
As inflation continues to climb in both advanced and developing economies, central banks tighten monetary policy and raise interest rates to curb soaring prices.
Read also; Global Food and Energy Crisis Set to Last Until 2024- World Bank’s Commodity Markets Report.
