For nations large and small around the world, hopes of preventing a recession are fading, the World Bank warned on Tuesday.
The weak war in Ukraine, the continuing suffocation of the supply chain, the blocking of Covid in China and the dizzying rise in energy and food prices are shattering economies all over the income ladder, burdening them with slower growth and rising inflation.
This set of problems “kills growth,” said David Malpas, president of the World Bank. “For many countries, the recession will be difficult to avoid.”
Global growth is expected to slow to 2.9% this year from 5.7% in 2021. The outlook presented in the Bank’s latest report on the global economic outlook is not only gloomier than it was six months ago. before the war broke out in Ukraine, but also lower the forecast of 3.6% in April of the International Monetary Fund.
Growth is expected to remain subdued in 2023. Growth in 2020 is expected to fall below the average achieved in the previous decade, the report said.
With the exception of a handful of oil-exporting countries such as Saudi Arabia, which benefit from prices above $ 100 a barrel, there is hardly a place on the globe that has not seen its bleak prospects. Among the most developed economies such as the United States and Europe, growth is expected to slow to 2.5% this year. China’s growth is projected to fall to 4.3% from 8.1% in 2021.
Russia’s economy is expected to shrink by 8.9 percent – a significant decline, but still less than other forecasters predict.
Emerging nations will face the worst failure, where the effects of the pandemic and war in Ukraine are still echoing. The poorest nations will become poorer.
Per capita incomes in emerging economies will fall 5 percent below what they were targeting before the pandemic, the report said. At the same time, the burden of government debt is increasing, a burden that will become heavier with rising interest rates. Approximately 75 million more people will face extreme poverty than expected before the pandemic.
In a sense, economic threats reflect those we faced in the 1970s, when spiraling oil shocks followed by rising interest rates caused paralyzing stagflation, the bank said. This combination of events has triggered a series of financial crises that have shaken developing countries, leading to what was known as the “lost decade” of growth.
The bank, which provides financial support to low- and middle-income nations, reiterated its familiar basket of remedies, which includes cutting government spending, using interest rates to reduce inflation and avoiding trade restrictions and subsidies. It also says that public spending must give priority to protecting the most vulnerable.
This protection includes ensuring that low-income countries have a sufficient supply of Covid vaccines.
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