World Bank lowers forecasts and emphasizes risk of “stagflation”-June 7, 2022 15:30

Andrea Charal

Washington, June 7 (Reuters)-The World Bank said on Tuesday that it had lowered its global growth forecast this year by 1.2 percentage points to 2.9 percent, Russia’s invasion of Ukraine, the COVID-19 pandemic, It threatened many countries with the recession.

The outbreak of conflict in Ukraine has exacerbated the slowdown in the global economy and may now be in “low growth and prolonged high inflation,” international organizations explain in a new edition of Outlook Global Economy. ..

Therefore, for 2023 and 2024, we expect global growth to be unchanged compared to this year and inflation, which is certainly low but still exceeds the targets of many countries.

Chairman David Malpas said that growth in economic activity is a combination of war, the recent blockade of China, supply chain tensions, and growth of low and high inflation not found in the world in “stagflation.” He said he was suffering from a combination of risks. It has been seen since the 1970s.

“The risks of stagflation today are considerable,” he wrote at the beginning of the report. “Investment is sluggish in many parts of the world, so restrained growth could continue into the end of the decade.”

“Currently, inflation has been at high levels for decades in many countries, and supply is expected to grow slowly, so there is a risk that inflation will last longer,” he added.

In total, global growth is expected to fall 2.7 percentage points between 2021 and 2024, more than double the slowdown experienced between 1976 and 1979, he said.

More affected emerging and developing countries

The World Bank report also stated that the interest rate hike decided to curb inflation in the late 1970s was the cause of the 1982 global recession and a series of financial crises in emerging and developing countries. Recall.

The situation is similar to what it was then, but there are also important differences, such as the stronger US dollar, the relatively weak oil prices, and the overall strength of the balance sheets of major financial institutions.

To mitigate risk, the World Bank said that political economy authorities would coordinate aid to Ukraine, counter rising prices of hydrocarbons and groceries, strengthen public debt relief, and with COVID-19. He added that the fight must be strengthened. Accelerating the transition to a “low carbon” economy, David Malpass continues.

In developed countries, growth is expected to slow sharply, reaching 2.6% this year, from 5.1% in 2021 to 2.2% in 2023.

That of emerging and developing countries should not exceed 3.4% in 2022, after 6.6% last year and an average of 4.8% for the period 2011-2019.

For commodity exporters, the impact of the war in Ukraine should be more than overturning the positive impact of rising global prices. Growth forecasts for 2022 have been revised downwards in nearly 70% of emerging economies and developments.

The World Bank said Ukraine’s activity should decline by 45.1% this year and Russia by 8.9%.

(Report Andrea Shalal, French version of Marc Angrand, edited by Kate Entringer)