World Bank sees sharp slowdown for global economy, cutting forecasts for US and China
- Global growth is expected to decelerate ‘markedly’ to 4.1 per cent in 2022 from 5.5 per cent last year, and drop further to 3.2 per cent in 2023
- Recovery in developing countries is under threat from high debt levels, new coronavirus variants and rising income inequality
The World Bank on Tuesday cut its forecasts for economic growth in the United States, the Euro area and China and warned that high debt levels, rising income inequality and new coronavirus variants threatened the recovery in developing economies.
It said global growth is expected to decelerate “markedly” to 4.1 per cent in 2022 from 5.5 per cent last year, and drop further to 3.2 per cent in 2023 as pent-up demand dissipates and governments unwind massive fiscal and monetary support provided early in the pandemic.
The forecasts for 2021 and 2022 – the first by a major international institution – were 0.2 percentage point lower than in the bank’s June Global Economic Prospects report, and could be knocked even lower if the Omicron variant persists.
The International Monetary Fund is also expected to downgrade its growth forecasts in its update on January 25.
The bank’s latest semi-annual forecast cited a big rebound in economic activity in advanced and developing economies in 2021 after contractions in 2020, but warned that longer-lasting inflation, ongoing supply chain and labour force issues, and new coronavirus variants were likely to dampen growth worldwide.