(AP) The World Bank has reduced its global economic outlook, citing Russia’s war in Ukraine, the threat of severe food scarcity, and concerns about the emergence of “stagflation,” a deadly combination of inflationary pressures and low growth that hasn’t been seen in over four decades.
The one eighty nine country anti-poverty organization forecasted that the global economy would grow by 2.9 percent this year. That would be lower from 5.7 percent growing importance in 2021 and the 4.1 percent it predicted in January for 2022.
“For many countries, recession will be hard to avoid,” stated President David Malpass of World Bank.
In 2023 as well as 2024, the agency doesn’t see much of a difference: It forecasts only 3% worldwide growth in both years.
The World Bank has lowered its growth prediction for the United States to 2.5 percent this year, down from 5.7 percent in 2021 and the 3.7 percent it predicted in January. It lowered the GDP forecast for the Nineteen countries of Europe that use the euro as its currency to 2.5 percent this year, down from 5.4 percent last year and 4.2 percent in January.
The World Bank predicts growth in China, the world’s second-largest economy behind the United States, to fall to 4.3 percent this year from 8.1 percent last year. China’s zero-COVID regulations, which included severe lockdowns in Shanghai and other cities, effectively halted economic activity. The Chinese government is assisting in alleviating the economic hardship.
The growth rate of emerging market and developing economies is expected to slow to 3.4 percent this year, down from 6.6 percent in 2021.
Russia’s invasion of Ukraine has wreaked havoc on global oil and wheat trade, wreaking havoc on an economy that had been bouncing back from the coronavirus pandemic. As a result, already-high commodity prices have risen even more, jeopardizing the availability of cheap food in developing countries.
Malpass stated, “There is a serious risk of malnutrition, deepening hunger, and even famine.”
Oil prices are expected to rise 42 percent this year, while non-energy commodity prices are expected to rise about 18 percent, according to the World Bank. However, it forecasts an 8% reduction in oil and other commodity prices in 2023. It compared the current rise in energy and food prices to the 1970s oil shocks.
“Additional adverse shocks will enhance the risk that the global economy will endure a period of stagflation reminiscent of the 1970s,” the agency warned in its latest Global Economic Prospects report.
The preceding episode of stagflation, according to the World Bank, necessitated rate increases so large that they threw the world into recession and triggered a series of financial crises in developing countries.
The preceding is a summary of an article that originally appeared on Headline Wealth.