Tuesday 7 June 2022 06:52 PM World Bank slashes global growth forecast by nearly a third and warns of ... trends now

Tuesday 7 June 2022 06:52 PM World Bank slashes global growth forecast by nearly a third and warns of ... trends now
Tuesday 7 June 2022 06:52 PM World Bank slashes global growth forecast by nearly a third and warns of ... trends now

Tuesday 7 June 2022 06:52 PM World Bank slashes global growth forecast by nearly a third and warns of ... trends now

The World Bank has slashed its global growth forecast by nearly a third for 2022, warning that the risk of 1970s-style 'stagflation' is increasing and saying many countries now face recession.

'The danger of stagflation is considerable today,' World Bank President David Malpass wrote in the foreword to Tuesday's report, which cut global growth projections to 2.9 percent for 2022.

Russia's invasion of Ukraine had only magnified the slowdown in the global economy, which was now entering what could become 'a protracted period of feeble growth and elevated inflation,' according to the Global Economic Prospects report, warning that the outlook could still grow worse. 

'Subdued growth will likely persist throughout the decade because of weak investment in most of the world. With inflation now running at multi-decade highs in many countries and supply expected to grow slowly, there is a risk that inflation will remain higher for longer,' wrote Malpass. 

A chart shows the World Bank's revised growth forecasts for the world, advanced economies, and Emerging Markets and Developing Economies (EMDE)

A chart shows the World Bank's revised growth forecasts for the world, advanced economies, and Emerging Markets and Developing Economies (EMDE)

'The danger of stagflation is considerable today,' World Bank President David Malpass (above) wrote in the foreword to Tuesday's report

'The danger of stagflation is considerable today,' World Bank President David Malpass (above) wrote in the foreword to Tuesday's report

In a news conference, Malpass said that if certain downside risks materialize, global growth could fall to 2.1 percent in 2022 and 1.5 percent in 2023, driving per capita growth close to zero.

Malpass said global growth was being hammered by the Ukraine war, fresh COVID lockdowns in China, supply-chain disruptions and the rising risk of stagflation -- a phenomenon of weak growth and high inflation last seen in the 1970s.

Between 2021 and 2024, the pace of global growth is projected to slow by 2.7 percentage points, Malpass said, more than twice the deceleration seen between 1976 and 1979.

The report warned that interest rate increases required to control inflation at the end of the 1970s were so steep that they touched off a global recession in 1982, and a string of financial crises in emerging market and developing economies.

Ayhan Kose, director of the World Bank unit that prepares the forecast, told reporters there was 'a real threat' that faster than expected tightening of financial conditions could push some countries into the kind of debt crisis seen in the 1980s.

While there were similarities to conditions back then, there were also important differences,

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