Throughout the coronavirus pandemic, the bank has sounded the alarm about growing levels of inequality within as well as between countries – and the latest outlook is no exception.
The world economy is entering a phase of “pronounced slowdown”, the World Bank warned on Tuesday as the Omicron variant of the coronavirus, and the triple blow of rising inflation, high government debt levels and rising income inequality threaten recovery in emerging and evolving threats. economies.
The latest Global Economic Prospects report (PDF) of the World Bank sees global economic growth shift from 5.5 percent in 2021 to 4.1 percent in 2022 – a outlook that is more pessimistic than its June call for 4.3 percent growth this year.
Throughout the pandemic, the bank sounded the alarm about growing levels of inequality within as well as between nations – and the latest outlook is no exception.
In developing economies, many governments do not have the spending power to drive growth. Meanwhile, rising prices for assets such as equities and real estate continue to make the rich even richer, while inflationary pressures hit low-income households particularly hard.
Moreover, unlike more developed economies, emerging and developing countries have less monetary room for maneuver to keep inflation warm. Many have raised interest rates several times to keep price pressures in check, but that policy instrument also cools economic activity. The result: rising borrowing costs increase the chances that developing and emerging economies could experience a “hard landing” – when economic activity recovers quickly from a slump, only to slow sharply.
“This growing difference in fortunes is particularly worrying given the potential for social discontent in developing countries,” the bank warned.
The growing inequality is exacerbated by increasing uncertainty as Omicron infections spread rapidly, the bank noted, disrupting economic activity already hampered by supply chain bottlenecks.
Those supply snores leave poorer nations “last in the global supply line,” the bank said, as countries with deeper pockets exceed them for scarce goods.
Raw material shortages and the consequent volatility in commodity prices, as well as “extreme weather conditions driven by climate change, exacerbate food insecurity risks, which further burden health and nutrition,” the report said.
Diverse growth rates
The World Bank predicts a gaping gap in growth rates between advanced and less affluent economies.
Richer countries are expected to see a slowdown in economic growth from 5 percent last year to 3.8 percent this year and 2.3 percent in 2023 – a moderate pace that, according to the bank, will nevertheless be “sufficient to restore output and investment to their pre-pandemic trend in these economies ”.
For emerging and developing economies, by contrast, the bank is asking growth rates to fall from 6.3 percent last year to 4.6 percent this year and 4.4 percent in 2023 – leaving economic growth in those countries 4 percent below their pre-pandemic trend.
“For many vulnerable economies, the setback is even greater,” the bank said, noting that “output from fragile and conflict-affected economies will be 7.5 percent below the pre-pandemic trend, and output from small island states will be 8.5 percent lower. be. ”
As in previous reports, the bank continues to call on countries to prioritize coronavirus vaccine equity to bring the pandemic “under control”.
“The supply of vaccines is increasing significantly, but new variants and bottlenecks for the deployment of vaccines remain major obstacles, causing health uncertainty to continue into the future,” the report said.
The World Bank also continues to push for accelerated debt relief efforts to help low-income countries under stress.