World Bank experts warn that worldwide stagflation may be coming

WASHINGTON — The World Bank slashed its global growth forecast by nearly a third from 4.1% to 2.9% for 2022, saying that that Russia’s invasion of Ukraine, coupled with COVID-19 pandemic lockdowns in China, supply chain disruption and rising inflation has created a strong risk for stagflation worldwide.

Stagflation is a period of weak growth and high inflation that occurred in the 1970s.

“The danger of stagflation is considerable today,” World Bank President David Malpass commented in the report. “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 than currently anticipated.”

To reduce the stagflation risk, Malpass said policymakers need to coordinate crisis response and financial aid for Ukraine, counter the spike in food and oil prices by boosting supply of key food and energy commodities, and avoid export and import restrictions that magnify the rise in prices.

The report indicated global inflation would likely remain above targets in many economies.

  • U.S. growth is expected to drop to 2.5% in 2022, down from 5.7% in 2021, with the EU to dropping to 2.5% down from 5.4% in 2021.
  • China’s growth is expected to drop to 4.3% in 2022, down from 8.1% in 2021.

Related stories:

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *