The World Bank sharply downgraded its outlook for the global economy, pointing to the war in Ukraine, the prospect of widespread food shortages and fears of a possible return of stagflation, a toxic mix of high inflation and sluggish growth not seen in over 40 years.
The World Bank worsens forecast for global economy
STEPANAKERT, JUNE 8, ARTSAKHPRESS: The global economy will grow by 2.9% this year. This is less than the 5.7% global growth in 2021 and the 4.1% forecast for 2022 back in January. It will be difficult for many countries to avoid a recession, said World Bank President David Malpass, news.am informs.
The World Bank does not see a more rosy picture in 2023 and 2024: it forecasts global growth of just 3% for both years.
For the United States alone, the World Bank cut its growth forecast to 2.5% this year from 5.7% in 2021 and from the 3.7% it forecast in January. For the 19 European countries that use the euro, he cut his growth forecast to 2.5% this year from 5.4% last year and from 4.2% expected in January.
In China, the world's second largest economy, growth will slow to 4.3% from 8.1% last year.
Emerging market and developing economies combined are projected to grow 3.4% this year, compared to 6.6% in 2021.
The World Bank expects oil prices to rise by 42% this year, while prices for non-energy goods will rise by almost 18%. But he predicts that oil and other commodity prices will fall by 8% in 2023. He compared the current surge in energy and food prices to the oil shocks of the 1970s.
The prospect of stagflation presents the Federal Reserve and other central banks with a dilemma: if they keep raising interest rates to fight inflation, they risk triggering a recession. But if they try to stimulate their economy, they risk raising prices and making inflation an even more intractable problem.
The World Bank noted that the previous period of stagflation required such a sharp increase in rates that it plunged the world into recession and led to a series of financial crises in the poor countries of the developing world.