The global economy faces a “grim outlook,” according to World Bank President David Malpass, as the pandemic’s aftershocks continue to stifle growth, particularly in developing countries.
Global growth will slow to 4.1 percent this year, down from 5.5 percent in 2021, according to his organization’s latest forecast.
It attributed the slowdown to virus threats, the winding down of government aid, and the fading of an initial surge in demand.
Mr. Malpass, on the other hand, expressed concern about rising global inequality.
“The big drag is the inequality that’s built into the system,” he told the BBC, adding that poorer countries were particularly vulnerable to the economic consequences of inflation-fighting efforts.
“The outlook for the weaker countries is that they will continue to lag behind. Insecurity is a result of this.”
According to the bank, by 2023, all advanced economies, including the United States, the Eurozone, and Japan, will have recovered from the pandemic’s impact.
However, output in developing and emerging countries is expected to remain 4% lower than before Covid.
Mr. Malpass blamed global inflation on stimulus programs in the richest countries for widening the gap. While many countries, including the United States, are expected to raise interest rates in order to curb price rises, Mr Malpass warned that higher borrowing costs could harm economic activity, particularly in weaker economies.
“The problem with rate hikes is that they hurt people who need floating rate money… which is usually new businesses, women-owned businesses, and businesses in developing countries,” Mr Malpass explained.
Separately, the World Economic Forum (WEF) warned that divergent economic recovery was making collaboration on global issues like climate change more difficult.
“Widening disparities within and between countries will not only make controlling Covid-19 and its variants more difficult, but they will also risk stalling, if not reversing, joint action against shared threats that the world cannot afford to overlook,” the World Economic Forum said in its annual global risks report on Tuesday.
According to the World Bank’s Global Economic Prospects report, the global economy recovered from the pandemic in 2021 with the strongest post-recession expansion in 80 years.
However, gains are expected to slow this year as virus variants and rapidly rising food and energy prices put a strain on households. According to the report, global inflation is at its highest level since 2008.
Supply chain bottlenecks and the unwinding of stimulus programs are also risks, according to the bank, which lends to countries all over the world.
Due to the spread of the Omicron and Delta Covid variants, the slowdown in the second half of 2021 was already larger than the bank had anticipated in its June forecast. It predicts a “pronounced slowdown” this year, with global growth slowing even more to 3.2 percent in 2023.
“The reality is that Covid and the shutdowns are still wreaking havoc on people around the world, especially in poorer countries,” Mr Malpass said. “It’s just a bleak outlook.”
China, where growth is expected to slow to 5.1 percent this year from 8% last year, and the United States, where growth is expected to slow to 3.7 percent this year from 5.6 percent in 2021, are driving the global slowdown. According to the bank, eurozone growth will slow to 4.2 percent this year from 5.2 percent last year.
India is a bright spot, with its growth rate expected to increase this year from 8.3 percent to 8.7 percent.
However, many emerging markets are still dealing with additional issues, such as low vaccination rates.
For example, growth in Latin America and the Caribbean is expected to slow to 2.6 percent in 2022, down from 6.7 percent last year.
READ MORE:
- India’s economy is booming, but it’s not without its problems
- Resolution of complex product taxonomy Fashion Retail Challenges With AI
- China’s economy has grown by 18.3% since post-Covid
