The World Bank lowered its forecast for global economic growth this year, warning that several
years of above average inflation and below average growth are likely ahead.
The Washington-based organization reduced its estimate for global growth this year to 2.9%
from 4.1% previously due to a surge in energy and food prices, supply disruptions triggered by
Russia’s invasion of Ukraine, and a drive by central banks to increase interest rates.
The global economy expanded 5.7% in 2021 after the COVID-19 pandemic triggered the
deepest global recession since World War II.
“The world economy is again in danger,” President David Malpass said in a news release. “It is
facing high inflation and slow growth at the same time. Even if a global recession is averted, the
pain of stagflation could persist for several years -- unless major supply increases are set in
motion.”
Central banks are battling a worse-than-anticipated inflation surge spurred by disruptions in the
supply of goods, energy and food amid lockdowns in key production hubs in China and the war
in Ukraine. More than 60 monetary authorities, including the Bank of England and the U.S.
Federal Reserve, have raised interest rates this year.
Accelerating inflation and slowing growth have raised World Bank officials’ concerns that the
global economy is entering a period of stagflation reminiscent of the 1970s. As a result, a
steeper-than-anticipated policy tightening may now again be required to return inflation to target,
and this might trigger a global recession.
About 60% of the world’s 75 poorest countries are in or at risk of debt distress, and this is
spreading to middle-income countries, according to the World Bank.
The U.S. economy will likely expand 2.5% this year, 1.2 percentage points below the previous
projection due to higher energy prices, tighter financial conditions, and additional supply
disruptions caused by the invasion of Ukraine.
Europe’s growth is projected to slow to 2.5%, 1.7 percentage points less than seen previously.
And the World Bank cut the outlook for China’s economic expansion to 4.3% this year due to
economic damage from renewed COVID-19 lockdowns.
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