World Bank slashes growth forecasts in face of slump

THE second global recession this decade looms, the World Bank has warned as it slashed its growth forecasts for almost all advanced economies this year and next.

David Malpass, the World Bank president, said Russia’s war in Ukraine, stubbornly high inflation and global interest rate rises threatened to add to the “already devastating” legacy of Covid and resulting global lockdowns.

The institution downgraded its forecasts for global growth to 1.7pc this year and 2.7pc in 2024, from previous projections of 3pc in both years.

Economists warned that the global economy remained “fragile”, adding: “higher than expected inflation, abrupt rises in interest rates to contain it, a resurgence of Covid-19, or escalating geopolitical tensions could push the global economy into recession.”

This would mark the first time since the Second World War that two global recessions have occurred within the same decade.

The World Bank blamed sharp slowdowns in America, the eurozone and China for the downgrades as it slashed its growth forecasts for nearly all advanced economies and most developing markets.

Growth in advanced economies is projected to slow from 2.5pc in 2022 to 0.5pc this year. “Over the past two decades, slowdowns of this scale have foreshadowed a global recession,” the World Bank said.

“The crisis facing development is intensifying as the global growth outlook deteriorates,” added Mr Malpass. “Weakness in growth and business investment will compound the alreadydevastating reversals in education, health, poverty, and infrastructure and the increasing demands from climate change.”

The World Bank said that the Chinese economy has been an engine for global growth in the last three decades, expanding nearly 50-fold since 1990 and now accounting for nearly a fifth of world economic output.

But the report has pared back its 2022 growth estimate for China to 2.7pc, its lowest annual growth rate since the 1970s with the exception of 2020 when the Covid pandemic hit.

More than 70pc of emerging and developing economies have also had their growth prospects revised downward. The World Bank also noted the risk of widespread debt crises in emerging and developing economies, as the strong dollar raised the cost of debt repayments for countries who had borrowed in the currency, such as Ghana, Tunisia and Sri Lanka.

In response to the findings, the World Bank has called for increased investment in emerging and developing markets, and faster debt restructuring.