According to the World Bank’s latest Global Economic Prospects report, worldwide growth is expected slow down even more than previously thought. The report has global economic growth at 2.9% in 2022, down from the 5.7% growth seen in 2021 as well as the 4.1% growth predicted for 2022 back in January.
“The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” World Bank President David Malpass said in a Tuesday statement. “Markets look forward, so it is urgent to encourage production and avoid trade restrictions. Changes in fiscal, monetary, climate and debt policy are needed to counter capital misallocation and inequality.”
According to World Bank, the downgrade in economic growth is spread out among economies of all sizes. This includes:
- The United States: 5.7% growth in 2021, 2.5% growth predicted in 2022
- China: 8.1% growth in 2021, 4.3% growth predicted in 2022
- The 19 European countries that use the Euro: 5.4% growth in 2021, 2.5% growth predicted in 2022
- Emerging market and developing countries: 6.6% growth in 2021, 3.4% growth predicted in 2022.
“We downgraded forecasts across the board. In the case of advanced economies, forecasts were downgraded. In the case of emerging developing economies, forecasts were downgraded,” said Ayhan Kose, the director of the World Bank’s Prospects Group. “We downgraded growth numbers for this year for 70 percent of countries relative to what we had in January.”
Russia’s invasion of Ukraine has severely disrupted global trade in energy and wheat. Already-high commodity prices have gone even higher as a result, threatening the availability of affordable food in poor countries. The World Bank expects oil prices to surge 42% and non-energy commodity prices to climb nearly 18% this year.
“Global inflation is expected to moderate next year but it will likely remain above inflation targets in many economies,” the World Bank said. “The report notes that if inflation remains elevated, a repeat of the resolution of the earlier stagflation episode could translate into a sharp global downturn along with financial crises in some emerging market and developing economies.”
The agency doesn’t foresee a much brighter picture in 2023 and 2024, predicting just 3% global growth for both years. However, the World Bank also foresees oil and other commodity prices both dropping 8% in 2023.
The Associated Press contributed to this report.
