- The World Bank lowered its global economic growth forecast on Monday because of Russia’s invasion of Ukraine.
- The organization forecasts growth of 3.2% in 2022, down from the January forecast of 4.1%.
- The company also forecasts a 4.1% reduction in Europe and Central Asia due to soaring food and energy prices.
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The economic recovery from the pandemic was already expected to slow as markets and supply chains around the world gradually return to normal, but Russia’s invasion of Ukraine was predicted by economists just a few months ago. I’m braking harder than I expected.
The World Bank lowered its growth forecast on Monday because of the conflict in Ukraine and its widespread impact on inflation, supply chain and financial sector tensions. According to Reuters, the organization is now expecting a 3.2% increase in global economic output by 2022, David Malpass said Monday. This is down from the 4.1% forecast shared by bank economists in January.
If the forecasts come true, growth will be about half the 5.7% pace seen by 2021. Global gross domestic product has already recovered from the lows of the coronavirus recession, but recovery is uneven.
Developed countries have led by unprecedented government stimulus and historically low interest rates. However, developing countries do not have the same tools to support their economies and have generally recovered at a much slower pace. Due to the non-uniform deployment of vaccines, delta and omicron waves show similar differences.
The World Bank even sees the economies of Europe and Central Asia shrinking 4.1% annually, according to Reuters. The contraction, which organizations consider to be a major impediment to global growth, is primarily related to the Ukrainian conflict and its impact on inflation.
The war has already pushed up the prices of various important commodities, including oil, wheat, fertilizers and natural gas. Rising prices have raised concerns that central banks may slow down major economies too aggressively to bring about a new recession in order to calm inflation.
In addition to sluggish economic forecasts, Malpas also provided a $ 170 billion (Rent 2.5 trillion) aid package for 15 months to counter war-related economic tensions. The organization aims to distribute $ 50 billion (Rant 736 billion) in funding over the next three months.
“This is a continuous and large-scale response to the crisis, given the ongoing crisis,” Bloomberg said.
The announcement comes a few days before the World Bank plans to hold a spring conference where inflation, food insecurity, and other economic pressures associated with aggression are expected to be addressed.
The World Bank’s latest estimates outperform other estimates that underpin the weak recovery in the coming months. Federal Reserve policymakers lowered US growth forecasts in mid-March, linking worsening outlooks to aggression and inflation spikes. Wall Street giant Deutsche Bank went further in early April, lowering growth forecasts and predicting that the United States would be in recession by the end of 2023.
The World Bank’s latest estimates indicate that the global economy is still avoiding a recession. However, with the impending war and inflation reaching its highest levels in decades, there is a lot of downside risk.