Monday, January 24, 2022

World Bank sees sharp world growth slowdown, ‘hard landing’ risk for poor countries

A participant stands near the World Bank logo at the International Monetary Fund – World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia on October 12, 2018. Reuters/Johannes P. Christo

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WASHINGTON, Jan 11 (Reuters) – The World Bank on Tuesday cut its forecasts for economic growth in the United States, the euro area and China, and warned that high debt levels, rising income inequality and new COVID-19 variants could hamper growth. Threatened to improve. economies.

It said global growth is expected to decline “obviously” in 2022 from last year’s 5.5% to 4.1%, and to fall to 3.2% in 2023 as demand slackens and governments are largely involved in the pandemic. Provides financial and monetary assistance.

The forecast for 2021 and 2022 was 0.2 per cent lower than the bank’s June Global Economic Prospects report. The International Monetary Fund is also expected to downgrade its growth forecast in its January 25 update.

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The bank’s latest semi-annual forecast cited a large rebound in economic activity in advanced and developing economies in 2021 after a contraction in 2020, but warned that prolonged inflation, ongoing supply chain and labor force issues , and there was a possibility of new COVID-19 variants. To slow down development around the world.

“A clear recession is underway,” Ayan Kos, director of the World Bank’s prospects group, told Reuters in an interview. “Policy support is being withdrawn and we face a lot of risks.”

Kos said the rapid spread of the highly infectious Omicron variant showed the ongoing disruption caused by the pandemic, and added that the overburdened health system could be knocked down by as much as 0.7 percentage points above global forecasts.

COVID-19 has caused nearly 300 million reported infections and more than 5.8 million deaths worldwide, according to data compiled by Reuters. According to the Our World in Data website, 59% of the world’s population has received at least one dose of the COVID-19 vaccine, with only 8.9% of people in low-income countries receiving at least one dose.

Kos said the pandemic has widened growth rates in advanced and developing economies as well as within countries, which could lead to increased social tensions and unrest.

He said there were increasing risks of a “hard landing” for developing countries because of their limited options to provide financial aid, persistent inflationary pressures and high fiscal vulnerabilities.

The report forecasts that growth in advanced economies will fall from 3.8 per cent in 2022 to 5% in 2021 to 2.3% in 2023, but added that their output and investment will still return to their pre-pandemic trend by 2023 .

The bank cut its 2021 US GDP growth by 1.2 percentage points to 5.6%, and forecast sharply lower growth at 3.7% in 2022 and 2.6% in 2023. It said Japan’s GDP growth would reach 1.7% in 2021, 1.2 percentage points lower than forecast in June, rising to 2.9% in 2022.

China’s GDP was expected to grow by 8% in 2021, about 0.5 percent lower than previously forecast, with growth seen slowing to 5.1% in 2022 and 5.2% in 2023.

Growth in emerging and developing economies is expected to fall from 6.3% in 2022 to 4.6% in 2021, lowering to 4.4% in 2023, meaning their output will remain 4% below the pre-pandemic trend.

Fragile and conflict-ridden economies will be down 7.5% from their pre-pandemic trend, while small island states, hit by the collapse of tourism, will be down 8.5%.

The bank noted that rising inflation – which hits low-income workers especially hard – was at its highest level in advanced economies since 2008, and highest since 2011 in emerging and developing economies.

Kos said rising interest rates posed additional risks, and could further undermine growth forecasts, especially if the United States and other large economies start raising rates this spring months earlier than expected.

He said the pandemic had pushed total global debt to the highest level in half a century, and that concerted efforts were needed to accelerate debt restructuring efforts for countries facing debt crises and involve private sector creditors .

The pandemic sharply increased global inequality in the scale of income, health care, economic growth and job losses, hitting women and low-skilled and informal workers much harder.

“This trend has the potential to leave lasting scars,” Kos said, noting that disruption in education could affect human capital for generations.

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Reporting by Andrea Schallal; Additional reporting by David Lauder; Richard Chang. editing by

Our Standards: Thomson Reuters Trust Principles.

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