Covid-19 outbreaks, declining policy support, and persistent supply chain bottlenecks will cause the global economic recovery to cool off more than previously estimated in 2022, after last year’s expansion saw the fastest post-recession pace in eight decades, the World Bank said. .
Global gross domestic product is likely to rise 4.1% this year, less than the 4.3% forecast in June, the Washington-based development organization said Tuesday in its semi-annual Global Economic Prospects report. By 2023, annual production is expected to remain below the pre-pandemic trend in all regions with emerging market and developing economies, while in advanced economies the gap is expected to close, he said.
“There is a serious slowdown taking place,” Ayhan Kose, chief economist for the institution’s Outlook Group, said in an interview. The global economy “is basically on two different flight paths: advanced economies are flying high; Emerging market and developing economies are flying low and lagging behind. ”
The global landscape is clouded by what the President of the World Bank Group, David Malpass, called “exceptional uncertainty.” Risks to the downside include renewed covid-19 outbreaks, the possibility of unpinned inflation expectations and financial stress against a backdrop of record debt levels, the bank said. In emerging markets with limited political space to provide support, risks increase the chances of a hard landing for their economies, he said.
Speaking to journalists, Malpass underscored the importance of debt relief for developing countries through the Common Framework established by the Group of 20 largest economies, including the full participation of China.
Malpass said he is “cautiously optimistic” that the initiative is at a tipping point that will see more useful restructurings. The framework has been plagued with delays and a lack of interest from debtor countries since it began in November 2020.
The poorest countries, those eligible for assistance under the bank’s International Development Association, owe about $ 35 billion in debt service this year to official bilateral and private creditors, with more than 40% owed to China, Malpass said. . Making those payments would leave countries with fewer resources to face challenges including the pandemic, foot shortages and malnutrition, Malpass said.
In advanced economies, high vaccination rates and considerable fiscal support have helped cushion some of the adverse economic impacts of the pandemic. By contrast, the pace of recovery in emerging nations has been further slowed by declining policy support and tightening financial conditions.
The bank cut its forecast for the US economy this year by half a percentage point to 3.7%, and cut its forecast for China’s economic expansion by 0.3 percentage point to 5.1%.
Although growth forecasts for emerging and developing nations are only slightly weaker than previous projections, this masks notable divergences between regions, the bank said. Downgrades in Europe and Central Asia and Latin America and the Caribbean, due to faster removal of policy support, are accompanied by improvements in the Middle East and North Africa and Sub-Saharan Africa amid higher-than-expected oil revenues.
In 2023, emerging and developing nations are expected to suffer “substantial scars,” with aggregate production 4% below its pre-pandemic trend. In fragile and conflict-affected emerging and developing countries, next year’s production is forecast 7% below pre-virus trends “as they face increased uncertainty, security challenges, weak investment prospects and progress of anemic vaccination, ”said the bank.
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