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Global growth will be stifled during inflation and war, says the World Bank

For large and small nations across the globe, hopes of averting a recession are fading, the World Bank warned on Tuesday.

The fierce war in Ukraine, ongoing suffocation in the supply chain, Covid-related shutdowns in China and staggering increases in energy and food prices are hitting economies along the entire income ladder, giving them slower growth and rising inflation.

This suite of problems “hammers growth,” said World Bank President David Malpass in a statement. “For many countries, recession will be difficult to avoid.”

Global growth is expected to slow to 2.9 per cent this year from 5.7 per cent in 2021. The outlook, delivered in the bank’s latest Global Economic Prospects report, is not only gloomier than that produced six months ago, before the war broke out. out in Ukraine, but also below the 3.6 percent forecast in April by the International Monetary Fund.

Growth is expected to remain subdued in 2023. Growth for the 2020s is expected to fall below the average achieved in the previous decade, the report states.

Apart from a handful of oil-exporting nations such as Saudi Arabia, which benefit from prices of more than $ 100 a barrel, there is hardly a place on the planet that has not seen the prospects faint. Among the most advanced economies such as the USA and Europe, growth is estimated to slow to 2.5 per cent this year. China’s growth is estimated to fall to 4.3 percent from 8.1 percent in 2021.

Russia’s economy is expected to contract by 8.9 percent – a sharp reduction, but still less than predictions from other forecasters.

Emerging nations will face the hardest setback, with the battles of the pandemic and the Ukraine war continuing to resonate. The poorest nations will become poorer.

Income per capita in developing economies will fall 5 percent below where it was before the pandemic hit, the report states. At the same time, the government debt burden is increasing, a burden that will grow heavier as interest rates rise. About 75 million more people will face extreme poverty than expected before the pandemic.

In some ways, the economic threats reflect those faced in the 1970s, when spiraling oil shocks followed by rising interest rates caused paralyzing stagflation, the bank said. This combination of events triggered a series of economic crises that shook developing countries, resulting in what became known as a “lost decade” of growth.

The bank, which provides financial support to low- and middle-income countries, reiterated its well-known basket of remedies that include limiting public spending, using interest rates to curb inflation and avoiding trade restrictions and subsidies. It also said that public spending should give priority to protecting the most vulnerable people.

That protection includes ensuring that low-income countries have adequate supplies of Covid vaccines.

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