For nations large and small around the world, the hope of avoiding a recession is fading, world bank warned on Tuesday.
The grinding war in Ukraine, ongoing supply chain shutdowns, Covid-related shutdowns in China, and staggering rises in energy and food prices are all hurting economies along the income ladder, weighing them down with slower growth and spiraling inflation.
This set of problems “undermine growth,” David Malpass, president of the World Bank, said in a statement. “For many countries, it will be difficult to avoid a recession.”
Global growth is expected to slow to 2.9 percent this year from 5.7 percent in 2021. The forecasts in the bank’s latest Global Economic Prospects report are not only bleaker than what was produced six months ago, before the outbreak of war in Ukraine, but also lower from 3.6 percent in April by the International Monetary Fund.
Growth is expected to remain muted in 2023. Growth in the 2020s is expected to fall below the average achieved in the previous decade, the report said.
Other than a handful of oil-exporting countries like Saudi Arabia, which benefits from prices in excess of $100 a barrel, there is hardly a spot in the world that hasn’t seen its outlook bleak. Among the more advanced economies such as the United States and Europe, growth is expected to slow to 2.5 percent this year. China’s growth rate is expected to decline to 4.3% from 8.1% in 2021.
The Russian economy is expected to contract by 8.9 percent – a significant drop, but still less than the forecasts of other forecasters.
Emerging countries will face the most difficult setback, as the strikes of the pandemic and the war in Ukraine continue to reverberate. The poorest countries will get poorer.
The report said per capita income in developing economies would be 5 percent below the level it was heading for before the pandemic. At the same time, the government debt burden is increasing, a burden that will only grow heavier as interest rates increase. Nearly 75 million people will face more extreme poverty than expected before the pandemic.
In some ways, the bank said, the economic threats mirror those it faced in the 1970s, when mounting oil shocks followed by higher interest rates triggered a crippling stagflation. This combination of events led to a series of financial crises that shook developing countries, resulting in what was known as the “lost decade” of growth.
The bank, which provides financial support to low- and middle-income countries, has repeated the familiar basket of remedies that include curbing government spending, using interest rates to curb inflation and avoiding trade restrictions and subsidies. He also said that public spending should prioritize protecting the most vulnerable.
That protection includes ensuring that low-income countries have access to an adequate supply of COVID-19 vaccines.
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