The World Bank’s chief economist has warned that Russia’s invasion of Ukraine might trigger a worldwide recession if food, gasoline, and fertilizer prices rise.
On Wednesday, David Malpass said it’s tough to “see how we avoid a recession” during a US business gathering.
A number of coronavirus lockdowns in China, he added, are contributing to fears about a slowdown.
His remarks are the latest warning about the growing possibility that the global economy may decline.
“When we look at world GDP… it’s hard to see how we can escape a recession right now,” Mr Malpass added, without providing a specific prognosis.
“Just the thought of energy costs doubling is enough to start a recession,” he warned.
The World Bank slashed its global economic growth prediction for this year by nearly a full percentage point, to 3.2 percent, earlier this month.
Gross Domestic Product (GDP) is a metric for measuring economic growth. Economists and central banks keep a close eye on it since it is one of the most essential means of determining how well, or poorly, an economy is operating.
It aids firms in determining whether or not to expand and hire more people, or whether or not to spend less and reduce their staff.
It is also used by governments to influence choices on everything from taxation to expenditure. It, along with inflation, is a significant indicator for central banks when deciding whether or not to raise or cut interest rates.
Mr. Malpass also stated that many European countries remain overly reliant on Russian oil and gas.
Even as Western countries go forward with measures to minimize their reliance on Russian energy, this is the case.
He also said that measures by Russia to reduce gas supply might create a “significant slowdown” in the area during a virtual event hosted by the US Chamber of Commerce.
Higher energy prices, he claimed, were already dragging on Germany’s economy, which is Europe’s and the world’s fourth largest.
Mr Malpass stated that shortages of fertiliser, food, and energy are also affecting developing countries.
Mr Malpass also expressed alarm about lockdowns in several of China’s key cities, including Shanghai, the country’s financial, manufacturing, and shipping powerhouse, which are “still having repercussions or slowing affects on the globe,” according to him.
“China’s real estate market was already contracting, therefore the prediction for China’s growth before Russia’s invasion had already weakened significantly for 2022,” he stated.
“Then came the Covid waves, which resulted in lockdowns, significantly lowering China’s growth forecasts,” he continued.
China’s premier, Li Keqiang, said on Wednesday that the newest wave of lockdowns has affected the world’s second largest economy more than when the epidemic began in 2020.
He also demanded that officials take greater steps to reopen factories following lockdowns.
Mr Li stated, “Progress is not sufficient.” “Only 30% of firms have reopened in certain areas, according to reports… In a short amount of time, the ratio must be raised to 80%.”
In March and April, dozens of Chinese cities were placed under full or partial lockdown, including Shanghai, which was shut down for several days.
As a result of the restrictions, economic activity has slowed dramatically across the country.
Official numbers in recent weeks have revealed that significant segments of the economy, from manufacturing to shops, have been damaged.