The World Bank slashed its global growth forecast for 2022 and 2023, and cautioned that a rise in inflation, debt and income inequality could jeopardize the recovery in developing economies.
Global growth is expected to slow to 4.1% in 2022 and 3.2% in 2023 as more nations start unwinding fiscal and monetary policy support initiated to help during the global pandemic, the bank said in its annual “Global Economic Prospects” report.
The projections follow a strong rebound in global growth as demand soared after Covid-related lockdowns lifted last year. The World Bank estimated that the world economy grew 5.5% in 2021.
Major economies including the United States, China and countries in the Euro zone are expected to slow down this year, the bank said. It added that a resurgence in COVID-19 infections, due to the highly contagious Omicron variant, will likely disrupt economic activity and could worsen growth projections if it persists.
Ongoing supply-chain bottlenecks, rising inflationary pressures and elevated levels of financial vulnerability in large parts of the world could increase the risks of a “hard landing,” the World Bank warned
The World Bank is the first major global institution this year to come out with growth projections. The International Monetary Fund (IMF) is expected to release its World Economic Outlook update on January 25.
Growth in China is set to ease from an estimated 8% in 2021 to 5.1% this year, partly due to the lingering effects of the pandemic as well as additional regulatory tightening from Beijing, according to the World Bank.
Advanced economies are predicted to slow from 5% in 2021 to 3.8% in 2022, which the World Bank said will be “sufficient to return aggregate advanced-economy output to its prepandemic trend in 2023 and thus complete its cyclical recovery.”
On the other hand, developing economies are predicted to slow from an estimated 6.3% last year to 4.6% in 2022. For some smaller nations or even countries that rely heavily on tourism, the economic output is expected to stay below pre-pandemic levels, the bank said.
Inflation, which tends to hit low-income workers the hardest, is running at levels not seen since 2008, the bank said. Rising prices will constrain monetary policy where many developing economies are withdrawing support to contain inflation before the growth recovery is complete, it added.
