World Bank cuts forecast for global economic growth

THE World Bank is slashing its forecast for global economic growth this year, citing the war in Ukraine, inflation and the lingering effects of the pandemic.

The World Bank now expects the global economy to grow at a rate of 3.2 per cent in 2022, down from its previous estimate of 4.1 per cent, its president, David Malpass, said Monday morning. The World Bank estimated that the global economy grew 5.7 per cent last year.

The updated projection comes as policymakers from around the world head to Washington this week for the spring meetings of the World Bank and the International Monetary Fund (IMF).

“We begin this spring meeting facing severe overlapping crises,” Malpass said during a briefing with reporters. “There’s Covid, inflation and Russia’s invasion of Ukraine.”

He said these forces were expected to drive up global poverty rates as the world copes with sudden increases in prices of energy, fertiliser and food. Rising interest rates are expected to slow growth and exacerbate inequality, he said.

The World Bank is seeking to create a US$170 billion emergency fund to help the poorest nations being buffeted by multiple crises, he also said said on Monday (Apr 18).

The “crisis response envelope” will continue the work begun during the Covid-19 pandemic, and help countries deal with surging inflation, which was made worse by the Russian invasion of Ukraine as well as the “severe financial stress” caused by high debt levels, he said.

The World Bank is predicting a sharp contraction in the economies of Russia and Ukraine, and Malpass said nearby countries in Europe and Central Asia would feel the effects. Consumers in advanced economies are expected to reduce their spending this year as petrol prices rise.

The IMF is scheduled to release its World Economic Outlook on Tuesday.

NEW YORK TIMES, AFP