Global growth is expected to decelerate markedly from 5.5 percent in 2021 to 4.1 percent in 2022 and 3.2 percent in 2023 as pent-up demand dissipates and as fiscal and monetary support is unwound across the world, the World Bank said in a new report Tuesday.
The expected slow growth will be driven by the spread of COVID-19 Variants alongside inflation, debt, and inequality, which intensifies uncertainty.
Following a strong rebound in 2021, the global economy is entering a pronounced slowdown amid fresh threats from COVID-19 variants and a rise in inflation, debt, and income inequality that could endanger the recovery in emerging and developing economies, the World Bank said.
The rapid spread of the Omicron variant indicates that the pandemic will likely continue to disrupt economic activity in the near term.
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In addition, a notable deceleration in major economies—including the United States and China—will weigh on external demand in emerging and developing economies.
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 world economy is simultaneously facing COVID-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory. Rising inequality and security challenges are particularly harmful for developing countries,” said David Malpass, World Bank Group president.
“Putting more countries on a favourable growth path requires concerted international action and a comprehensive set of national policy responses.”
