The World Bank has predicted a “pronounced slowdown” for global growth in the next two years as pent-up demand dissipates and fiscal and monetary support is scaled back.
After global growth recovered to an estimated 5.5 per cent in 2021, the World Bank has forecast growth of 4.1 per cent in 2022 and 3.2 per cent in 2023 which it said would be the sharpest slowdown since at least the 1970s.
“The world economy is simultaneously facing COVID-19, inflation and policy uncertainty, with government spending and monetary policies in uncharted territory,” said World Bank Group president David Malpass.
“Putting more countries on a favourable growth path requires concerted international action and a comprehensive set of national policy responses.”
Growth in advanced economies is predicted to decline from 5 per cent in 2021 to 3.8 per cent in 2022 and 2.3 per cent in 2023.
This would be sufficient for these economies to restore output and investment to pre-pandemic levels according to the World Bank.
However, growth in emerging and developing economies is expected to fall from 5.3 per cent in 2021 to 4.6 per cent in 2022 and 4.4 per cent in 2023, with output remaining 4 per cent lower than the pre-pandemic trend.
“At a time when governments in many developing economies lack the policy space to support activity if needed, new COVID-19 outbreaks, persistent supply-chain bottlenecks and inflationary pressures, and elevated financial vulnerabilities in large swaths of the world could increase the risk of a hard landing,” the World Bank said.
The choices of policymakers in the next few years are set to determine the course of the next decade according to the World Bank’s managing director for development policy and partnerships Mari Pangestu.
“The immediate priority should be to ensure that vaccines are deployed more widely and equitably so the pandemic can be brought under control. But tackling reversals in development progress such as rising inequality will require sustained support,” she said.
The World Bank said that economic activity would likely continue to be disrupted by the pandemic as demonstrated by the rapid spread of the Omicron variant.
The United States is expected to record 5.6 per cent GDP growth in 2021, 1.2 percentage points lower than forecasted by the World Bank in June, while growth in the world’s largest economy is predicted to fall to 3.7 per cent in 2022 and 2.6 per cent in 2023.
China’s estimated GDP growth of 8 per cent in 2021 was half a percentage point lower than previously forecasted, with growth of 5.1 per cent anticipated in 2022 and 5.3 per cent in 2023.
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
