The global economy has a “dark prognosis,” according to World Bank President David Malpass, as the pandemic’s aftershocks continue to weigh on growth, particularly in impoverished countries.
Global growth would fall to 4.1 percent this year from 5.5 percent in 2021, according to his organization’s latest prediction.
It ascribed the slowdown to malware threats, the phasing down of government funding, and the fading of an initial surge in demand. On the other hand, Mr. Malpass expressed alarm about expanding global inequality.
“The great drag is the inequality that’s built into the system,” he told the BBC, adding that poorer countries were particularly exposed to the economic consequences of inflation-fighting efforts.
“It is expected that the weaker countries will continue to lag. Insecurity is a result of this.” All advanced economies, including the United States, the Eurozone, and Japan, are expected to have recovered from the pandemic by 2023, according to the bank.
However, output in developing and emerging countries is anticipated to remain 4% lower than before the Covid disaster.
Mr. Malpass blamed global inflation on stimulus programs in the richest countries for widening the gap. While several countries, including the United States, are anticipated to boost interest rates to curb price rises, Mr. Malpass warned that increasing borrowing costs could stifle economic growth, especially in poorer countries.
Mr. Malpass added, “The problem with rate hikes is that they harm people who need variable-rate money… which is mostly new businesses, women-owned businesses, and businesses in developing countries.”
Separately, the World Economic Forum (WEF) warned that unequal 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.
The global economy rebounded from the pandemic in 2021, according to the World Bank’s Global Economic Prospects report, with the strongest post-recession expansion in 80 years.
However, as virus strains and fast-rising food and energy prices put a strain on consumers, progress is expected to slow this year. Global inflation, according to the study, is at its highest level since 2008.
Supply chain bottlenecks and the unwinding of stimulus programs are additional dangers, according to the bank, which lends to countries all over the world.
Due to the introduction of the Omicron and Delta Covid versions, the slowdown in the second half of 2021 was already larger than the Bank had anticipated in its June prediction. It projects a “significant deceleration” this year, with global GDP slowing even more in 2023, to 3.2 percent.
The global slump is being driven by China, whose growth is forecast to drop to 5.1 percent this year from 8 percent last year, and the United States, whose growth is expected to drop to 3.7 percent this year from 5.6 percent in 2021. According to the bank, eurozone growth will decline to 4.2 percent this year from 5.2 percent last year.
India is a bright spot, with its growth rate expected to rise to 8.7% this year from 8.3% last year. However, many emerging markets are still dealing with additional issues, such as poor immunization rates.
Latin America and the Caribbean, for example, are expected to grow at 2.6 percent in 2022, down from 6.7 percent last year.