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The World Bank Warns of Future Hardship in Global Economy

The World Bank Warns  of Future Hardship in Global Economy
Source: Anadolu

The global economy has a “dark prognosis,” according to World Bank President David Malpass, as the pandemic’s aftershocks continue to weigh on development, particularly in impoverished nations.

Global growth will fall to 4.1 percent this year, down from 5.5 percent in 2021, according to his organization’s latest prediction.

It ascribed the slowdown to malware risks, the phasing down of government funding, and the fading of an initial surge in demand.

Mr Malpass, on the other hand, expressed concern about rising global inequality.

“The great drag is the inequality that’s built into the system,” he told reporters, adding that poorer nations were particularly exposed to the economic consequences of inflation-fighting measures.

“The expectation for the weaker countries is that they will continue to lag behind. Insecurity is a result of this.”

According to the bank, by 2023, all advanced economies, including the United States, the Eurozone, and Japan, would have recovered from the pandemic’s impact.

However, production in developing and emerging nations is anticipated to remain 4% lower than before Covid.

Mr. Malpass blamed global inflation on stimulus programs in the richest nations for widening the gap. While several nations, including the United States, are anticipated to boost interest rates in order to curb price rises, Mr Malpass warned that increased borrowing costs might harm economic activity, particularly in poorer economies.

“The problem with rate rises is that they damage those who require variable rate money… which is mainly new firms, women-owned businesses, and businesses in developing countries,” Mr Malpass explained.

Separately, the World Economic Forum (WEF) cautioned that unequal economic recovery was making collaboration on global issues like climate change more difficult.

“Widening disparities within and between countries will not only make controlling Covid-19 and its variants more difficult, but they will also risk stalling, if not reversing, joint action against shared threats that the world cannot afford to overlook,” the World Economic Forum said in its annual global risks report on Tuesday.

According to the World Bank’s Global Economic Prospects report, the global economy recovered from the pandemic in 2021 with the best post-recession recovery in 80 years.

However, advances are projected to diminish this year as virus strains and rapidly rising food and energy prices put a strain on consumers. According to the research, global inflation is at its highest level since 2008.

Supply chain bottlenecks and the unwinding of stimulus programs are additional dangers, according to the bank, which loans to governments all around the world.

Due to the introduction of the Omicron and Delta Covid versions, the slowdown in the second half of 2021 was already bigger than the bank had anticipated in its June prediction. It predicts a “pronounced slowdown” this year, with global growth slowing even more to 3.2 percent in 2023.

“The fact is that Covid and the shutdowns are still wreaking havoc on people throughout the world, especially in impoverished nations,” Mr Malpass added. “It’s just a bleak perspective.”

China, whose growth is predicted to fall to 5.1 percent this year from 8% last year, and the United States, where growth is expected to dip to 3.7 percent this year from 5.6 percent in 2021, are driving the global downturn. According to the bank, eurozone growth will decline to 4.2 percent this year from 5.2 percent last year.

India is a bright light, with its growth rate predicted to increase this year from 8.3 percent to 8.7 percent.

However, many emerging economies are still dealing with additional issues, such as poor immunization rates.

For example, growth in Latin America and the Caribbean is predicted to drop to 2.6 percent in 2022, down from 6.7 percent last year.