The world’s growth projection for 2022 has been dropped from 4.1% to 2.9% - and many countries are facing the possibility of a recession.
Image Credit: Gerd Altmann
The World Bank’s President David Malpass said that: “for many countries, recession will be hard to avoid.”
The World Bank has cut its global growth projection for this year from 4.1% to 2.9%, warning that many countries are likely to face recession.
A press release stated that: “Amid the war in Ukraine, surging inflation, and rising interest rates, global economic growth is expected to slump in 2022.”
Many countries such as Sri Lanka are already experiencing political turmoil with mass riots and violent protests due the effects of the Ukraine war and the Coronavirus pandemic. Famine is also expected in the third world.
Sri Lanka is not a poor country and has a GDP per capita that is higher than South Africa, Indonesia and Egypt; therefore, this shows that all countries are susceptible to volatility in the markets. Extremely high inflation is likely to affect developed nations even more in the future, but further instability has the potential to cause social unrest.
“Several years of above-average inflation and below-average growth are now likely, with potentially destabilizing consequences for low- and middle-income economies. It’s a phenomenon – stagflation – that the world has not seen since the 1970s.”
The World Bank has also said that worldwise growth would be stuck at 3% of the years 2023 and 2024, after halving projections from 5.7% for the year 2021; due to the war in Ukraine affecting trade and investment.
Their report indicated that the period of a slowdown in economic growth between 2021 and 2024 will be double that of the period between 1976 and 1979. It stated that recovery from the stagflation period of the 1970s needed increased interest rates in the West. Those “played a prominent role in triggering a string of financial crises in emerging markets and developing economies.”
In fact, the report stated that rich and poor countries will be affected by the slowdown in economic growth, but developing and emerging market economies are the ones that are going to be affected the most. Economic Growth in developed countries was projected to shrink from 5.1% to 2.6% in 2022; meanwhile, economic growth is projected to drop from 6.6% to 3.4% in developing nations.
The report then stated that: “Just over two years after Covid-19 caused the deepest global recession since World War II, the world economy is again in danger … Even if a global recession is averted, the pain of stagflation could persist for several years – unless major supply increases are set in motion.”