World Bank cuts global growth forecast for 2022

People line up outside a community center to be tested for COVID-19 during the coronavirus disease (COVID-19) outbreak in San Diego, California, on January 10, 2022.

Mike Black | Reuters

The World Bank cut its global growth forecasts for 2022 and 2023, warning that rising inflation, debt and income inequality could jeopardize the recovery of emerging and developing economies.

The bank in its “global economic outlook” reported Tuesday.

The forecasts come after a strong rebound in global growth as demand soared after Covid-related lockdowns were lifted. The World Bank estimates that the world economy will grow by 5.5% in 2021.

Major economies, including the U.S., China and euro zone countries, are expected to slow this year, the bank said. It added that the resurgence of Covid infections could disrupt economic activity in the short term due to the highly contagious variant of the omicron, which could worsen growth forecasts if it persists.

Persistent supply chain bottlenecks in much of the world, rising inflationary pressures and elevated levels of financial vulnerabilities could increase the risk of a “hard landing”, the World Bank warned.One hard landing Refers to a sharp slowdown in the economy after a period of rapid growth.

There is an ever-expanding canyon between [emerging economies’] Growth rates and growth rates in advanced economies.

David Malpass

World Bank President

The World Bank is the first major global institution to release growth forecasts this year. The International Monetary Fund is expected to release its World Economic Outlook update on January 25, Reuters reports.

growth forecast

According to the World Bank, China’s economic growth will slow from an estimated 8% in 2021 to 5.1% this year, due in part to the lingering effects of the pandemic and further tightening of regulation by Beijing.

Advanced economies are expected to slow from 5% in 2021 to 3.8% in 2022, which the World Bank said would be “enough to allow aggregate advanced economy output to return to pre-pandemic trends in 2023, completing its cyclical recovery.”

Emerging market and developing economies (EMDEs), on the other hand, are expected to “suffer huge output trauma from the pandemic”. Their growth trajectories are insufficient to restore investment or output to pre-pandemic levels by 2023, the report said.

Overall, EMDE is expected to slow to 4.6% in 2022 from an estimated 6.3% last year. For some smaller countries, even those heavily dependent on tourism, economic output is expected to remain below pre-pandemic levels, the bank said.

Rising inequality

The World Bank says the coronavirus pandemic has exacerbated income inequality, especially between countries.

It cited data showing that 60% of EMDE households surveyed in 2020 experienced a loss of income, with households in low-income countries and sub-Saharan Africa being the hardest hit.

Inflation, which tends to hit low-income workers the hardest, is at its highest level since 2008, the bank said. It added that higher prices will constrain monetary policy as many emerging and developing economies are withdrawing support to contain inflation before the growth recovery is complete.

The pandemic has also pushed total global debt to its highest level in half a century and could complicate future efforts to coordinate debt relief, the report said. The World Bank has called for “global cooperation” to help developing economies expand the financial resources they need for sustainable development.

COVID-19 risk

“We are seeing disturbing reversals in poverty, nutrition and health.”

Malpass also pointed out that the educational reversal brought about by school closures will have a permanent and huge impact on low- and middle-income countries.

Since the beginning of 2020, more than 300 million cases of COVID-19 have been reported and more than 5.5 million people have died. Vaccines are being rolled out unfairly, with poorer countries struggling to get enough doses.

Information published by Our World In Data It shows that while 9.49 billion doses of vaccine have been administered globally to date, only 8.9% of people in low-income countries have received at least one dose.

Many international agencies, including the World Bank and the World Health Organization, have called for a wider and fairer distribution of vaccines to control the outbreak.