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The World Bank is lowering its estimates for the growth of the global economy

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The war in Ukraine has amplified the slowdown in the global economy, which is now entering what could become “a prolonged period of weak growth and high inflation,” the World Bank said in a report on the global economic outlook, warning that growth prospects could get worse.

According to World Bank President David Malpass, the growth of the world economy could slow to 2.1% in 2022 and 1.5% in 2023, bringing per capita growth close to zero if the risks of a slowdown materialize. .

Malpass also said that the advance of the global economy was affected by the war, China’s restrictions, supply chain disruptions and the risk of stagnation, a period of weak growth and high inflation, last recorded in the 1970s.

“Currently, the danger of stagflation is considerable. Low growth is likely to persist over the decade due to low investment in most parts of the world. While in many countries inflation is at its highest level in decades and supply will rise slowly, there is a risk that inflation will remain high for a longer period of time “, Malpass said, informs News.ro.

He estimated that between 2021 and 2024, the growth rate of the global economy would slow by 2.7 percentage points, more than double the slowdown between 1976 and 1979.

The rise in interest rates needed to keep inflation under control in the late 1970s was so sharp that it caused a global recession in 1982, and a series of financial crises in emerging and developing economies.

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For his part, Ayhan Kose, the director of the World Bank’s unit preparing the forecast, told reporters that there was a “real danger” that the tightening of financial conditions faster than expected could push some countries into the kind of debt crisis seen in the 1980s. .

Although there are similarities with the conditions at the time, there are also significant differences, including the strength of the US dollar and, in general, lower oil prices, as well as generally strong balance sheets of major financial institutions.

To reduce risks, Malpass said, policymakers should work to coordinate aid to Ukraine, boost food and energy production, and avoid restrictions on exports and imports, which could lead to further price increases. oil and food.

He also called for efforts to step up debt reduction, warning that some middle-income countries could be in danger; strengthening efforts to limit Covid; and accelerating the transition to a low-carbon economy.

The World Bank expects the world economy to grow by just 2.9% in 2022, from an advance of 5.7% in 2021, and growth will remain close to this year’s level in 2023 and 2024. Overall, inflation is expected to moderate next year, but in many economies it is likely to remain higher than expected.

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In advanced economies, growth will decline significantly, to 2.6% in 2022 and 2.2% in 2023, from an advance of 5.1% in 2021. Emerging and developing economies would register, the year this, an increase of only 3.4%, compared to 6.6% in 2021, and well below the annual average of 4.8% in 2011-2019. In the Europe and Central Asia region, which includes Romania, the World Bank forecasts a 2.9% drop in the economy this year and a 1.5% increase next year.

In Ukraine, the forecasts indicate a contraction of 45.1%, and in Russia 8.9%.

Growth will slow sharply in Latin America and the Caribbean, reaching just 2.5% this year and continuing to slow to 1.9% in 2023, according to the bank.

The Middle East and North Africa would benefit from rising oil prices, reaching 5.3% in 2022, before slowing to 3.6% in 2023, while South Asia would grow by 6.8% in this year and 5.8% in 2023. Sub-Saharan Africa’s growth is expected to slow somewhat to 3.7% in 2022 from 4.2% in 2021, the bank said.

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