Sunday, December 04, 2022

World Bank slashes 2022 global growth forecast to 2.9 percent

The World Bank slashed its growth forecast for the global economy to 2.9 percent, 1.2 percentage points lower than its January forecast for a severe recession caused by the Russian invasion of Ukraine.

“The global economy is expected to experience the sharpest decline in more than 80 years after the initial recovery from the global recession,” the bank said in its Global Economic Prospects report on Tuesday.

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The slowdown comes after the growth rate jumped to 5.7 per cent in 2021 following the slowdown caused by the COVID-19 pandemic.

Russia’s invasion and Western sanctions on Moscow have driven up grain and oil prices, and drivers around the world are facing eye-popping prices at the pump.

“The war in Ukraine, the lockdown in China, supply-chain disruptions and the threat of stagflation are stifling growth. For many countries, it will be difficult to survive a recession,” said World Bank President David Malpass.

According to the report, the war is exacerbating the damage caused by the COVID-19 pandemic, adding to the slowdown in the global economy, which is entering “what could become a prolonged period of weak growth and high inflation”.

“This increases the risk of a deadlock, with potentially harmful consequences for middle- and low-income economies.”

The report notes some parallels to the 1970s, when growth had stalled and inflation was skyrocketing along with supply factors, leading to higher prices and a longer period of low interest rates.

But unlike that period, the US dollar is strong, and major financial institutions remain solid.

The bank cautioned against trying to contain the growth of inflation with price controls or export restrictions.

Malpass said it was “important to stimulate production and avoid trade restrictions.”

The report lowered the US growth forecast by 1.2 points to 2.5 percent, and lowered the forecast for China by 0.8 points to an unusually low 4.3 percent.

Meanwhile, the euro area forecast was lowered to 2.5 percent and Japan to 1.7 percent.

Russia’s economy is expected to shrink 11.3 percent this year.

Read more: US orders seizure of two planes owned by Russian oligarch Roman Abramovich

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