A recent World Bank report has highlighted that global economic growth is slowing. This slump in global economic growth has been attributed to the COVID-19 pandemic, war in Ukraine, and the resulting effects on food, fertilizer, oil prices, and more.
The World Bank warns, in its flagship Global Economic Prospects report, as released in June 2022, that the risk of recession and inflation, or stagflation, is increasing worldwide. Most economies have not fully recovered from the effects of the COVID-19 pandemic, and unemployment remains relatively high in some economies and sectors. Most sectors have yet to recover from the effects of the COVID-19 pandemic, and these include: tourism, exports, transportation, and logistics.
War in Ukraine
The war in Ukraine, in particular, is stifling post-pandemic recovery efforts to keep inflation within an acceptable range, according to the same report.
Unemployment remains relatively high in some economies, as most have not fully recovered from the COVID-19 pandemic and its severe effects on key sectors of the economy. These key sectors include: tourism, exports, transportation, and logistics .
Risk of recession
Indeed, the three effects mentioned above – slowing economic growth, rising food and oil prices, and persistently high unemployment – led the World Bank to warn in its flagship Global Economic Prospects report released in June 2022 that the risk of recession and inflation (stagflation) is increasing worldwide.
“The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” stated David Malpass, World Bank President.
Some of the policy prescriptions for developing economies are summarized in a quote from the director of the World Bank’s Prospects Group:
“Developing economies will have to balance the need to ensure fiscal sustainability with the need to mitigate the effects of today’s overlapping crises on their poorest citizens. Communicating monetary policy decisions clearly, leveraging credible monetary policy frameworks, and protecting central bank independence can effectively anchor inflation expectations.” outlined Ayhan Kose, Director of the World Bank’s Prospects Group.
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