Throughout the coronavirus pandemic, the bank has warned of rising inequality within and between countries – and its latest outlook is no exception.
The World Bank warned on Tuesday that the global economy was entering a “significant slowdown” as the Omicron variant of the coronavirus and a triple whammy of soaring inflation, high levels of government debt and rising income inequality threaten emerging markets and developing countries recovering economies.
The latest Global Economic Outlook report (PDF format) from the World Bank forecast that global economic growth will slow to 4.1% in 2022 from 5.5% in 2021 – a more pessimistic outlook than the 4.3% growth this year forecast in June.
Throughout the pandemic, banks have sound the alarm On growing inequality within and between countries – its latest outlook is no exception.
In developing economies, many governments lack the purchasing power to initiate growth. At the same time, rising asset prices such as stocks and real estate continue to make the rich richer while fueling inflation, hitting low-income households particularly hard.
Also, unlike more developed economies, emerging and developing countries have less monetary leeway to allow inflation to overheat. Many have hiked interest rates several times to contain price pressures, but the policy tool has also cooled economic activity. The result: Higher borrowing costs increase the likelihood that developing and emerging economies will experience a “hard landing” — when economic activity rebounds quickly from a blow, but then slows sharply.
“This growing division of fortunes is particularly troubling given the potential for social discontent in developing countries,” the bank warned.
The bank noted that uncertainty has grown as the Omicron infection spreads rapidly, fueling rising inequality and disrupting economic activity already hampered by supply chain bottlenecks.
The bank said these supply disruptions have left poorer countries “last on the global supply line” as countries with deep pockets outbid them for scarce commodities.
Shortages of raw materials and the resulting volatility in commodity prices, as well as “climate change-induced extreme weather events are exacerbating the risk of food insecurity and further burdening health and nutrition,” the report said.
different growth rates
The World Bank forecasts a growing gap in growth rates between advanced and less affluent economies.
Growth in richer countries is expected to slow from 5% last year to 3.8% this year and 2.3% in 2023 – a slowdown that the bank said would be “sufficient to restore output and investment to pre-pandemic levels. trends in these economies.”
By contrast, for emerging and developing economies, the bank called for growth to slow to 4.6% this year from 6.3% last year and to 4.4% in 2023, giving these countries higher growth rates than The pre-epidemic trend was 4% lower.
“For many fragile economies, the setback is even greater,” the bank said, noting that “output in fragile and conflict-affected economies will be 7.5 percent below pre-pandemic trends, and output in small island states will be 7.5 percent below the pre-pandemic trend. 8.5% below the pre-pandemic trend. . . ”
As it has done in past reports, the bank continues to call on countries to prioritize equity in a coronavirus vaccine to keep the pandemic “under control.”
“Vaccine availability is increasing significantly, but new variants and vaccine deployment bottlenecks remain major obstacles, causing health uncertainty to persist well into the future,” the report said.
The World Bank also continued to press for accelerated debt relief efforts to help low-income countries under pressure.