World Bank fears stagflation and cuts global growth forecast

If you visited our Market Mover section today, you may have seen the news that the World Bank (WB) fears stagflation. Let’s take a closer look at this topic.

In a wide-ranging report today, the WB warned that the war in Ukraine has deepened and continues to deepen the damage caused by the Covid-19 pandemic. In addition, it has created a host of other problems that have plunged many countries into recession, and the global economy is entering a protracted period of weak growth and elevated inflation.

The risks are considerable and subdued growth could persist for decades

In his report, the President mentioned.

“Subdued growth will likely persist throughout the decade because of weak investment in most of the world. With inflation now running at multi-decade highs in many countries and supply expected to grow slowly, there is a risk that inflation will remain higher for longer.”

World map with world currencies

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He further added.

“The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hampering growth. For many countries, recession will be hard to avoid,”

Growth will be low, but inflation should gradually decline

Global growth is expected to fall from 5.7% in 2021 to 2.9% in 2022, according to the bank. We should also hover around this value in the following years 2023-24. Global inflation should ease next year but is likely to remain above target in many economies.

Developing economies in particular will need to find a balance

Ayhan Kose, director of the World Bank’s Prospects Group, said on the topic regarding developing countries.

“Developing economies will have to balance the need to ensure fiscal sustainability with the need to mitigate the effects of today’s overlapping crises on their poorest citizens,”

So the situation looks difficult for the whole world at the moment and we can expect to have to face many of the consequences of everything the global economy is going through for some time to come.