The World Bank has sharply downgraded its outlook for the global economy, pointing to Russia’s action against Ukraine, the prospect of widespread food shortages and concerns about the potential return of “stagflation” — a toxic mix of high inflation and sluggish growth unseen for more than four decades.
The 189-country anti-poverty agency predicted Tuesday that the world economy will expand 2.9 percent this year. That would be down from 5.7 percent global growth in 2021 and the 4.1 percent it had forecast for 2022 back in January.
“For many countries, recession will be hard to avoid,” said David Malpass, the World Bank’s president.
The report warned that interest rate increases required to control inflation at the end of the 1970s were so steep that they touched off a global recession in 1982, and a string of financial crises in emerging market and developing economies.
While there were similarities to conditions back then, there were also important differences, including the strength of the U.S. dollar and generally lower oil prices, as well as generally strong balance sheets at major financial institutions.
To reduce the risks, policymakers should work to coordinate aid for Ukraine, counter the spike in oil and food prices, step up debt relief, strengthen efforts to contain COVID-19, and speed the transition to a low-carbon economy, Malpass said.
The bank forecast a slump in global growth to 2.9 percent in 2022 from 5.7 percent in 2021, with growth to hover near that level in 2023 and 2024. It said global inflation should moderate next year but would likely remain above targets in many economies.
Growth in advanced economies was projected to decelerate sharply to 2.6 percent in 2022 and 2.2 percent in 2023 after hitting 5.1 percent in 2021.
Emerging market and developing economies were seen achieving growth of just 3.4 percent in 2022, down from 6.6 percent in 2021, and well below the annual average of 4.8 percent seen in 2011-2019.
However, the Middle East and North Africa would benefit from rising oil prices, with growth seen reaching 5.3 percent in 2022 before slowing to 3.6 percent in 2023.
Sub-Saharan Africa’s growth was expect to slow somewhat to 3.7 in 2022 from 4.2 percent in 2021, the bank said.
Story compiled with assistance from wire reports.