Global growth will slow down over the next two the next two years and global recovery is set to decelerate amid continued COVID-19 flare-ups, diminished policy support and lingering supply bottlenecks, said the World Bank in its latest report.
The report stated that output in Emerging Market and Developing Economies (EMDEs) will remain substantially below the pre-pandemic trend over the forecast horizon, which is in contrast to that in advanced economies,
The Global Economic Prospects report said that it would be more difficult to achieve than in the past if some countries eventually require debt restructuring
DISRUPTION AND DECELERATION
The World Bank report said that notable deceleration in major economies, including the United States and China, will have an impact on external demand in their emerging and developing counterparts. World Bank Group President David Malpass 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.
Malpass pointed out that putting more countries on a favorable growth path requires concerted international action and a comprehensive set of national policy responses.
SETBACK IN FRAGILE ECONOMIES
The World Bank report mentioned that all advanced economies will have achieved a full output recovery by 2023. However, the output in emerging and developing economies will remain four per cent below its pre-pandemic trend, he added. The report mentioned that the setback is even larger in fragile and conflict-affected economies, whose output will be 7.5 per cent below the pre-pandemic trend. For small island states, it will be 8.5 per cent below. Meanwhile, rising inflation is constraining monetary policy, with low-income workers particularly hit hard. Inflation is running at the highest rates since 2008, both globally and in advanced economies, and has reached its highest rate in a decade in emerging market and developing economies.
PRIORITIZE VACCINE EQUITY
The World Bank report contains analytical sections that outline three emerging obstacles to durable recovery in developing economies. It also includes regional outlooks for growth over the next two years. World Bank’s Managing Director for Development Policy and Partnerships Mari Pangestu stressed the importance of multilateral collaboration as the choices policymakers make in the coming years will decide the course of the next decade.
“The immediate priority should be to ensure that vaccines are deployed more widely and equitably so the pandemic can be brought under control. But tackling reversals in development progress such as rising inequality will require sustained support,” she said.
“In a time of high debt, global cooperation will be essential to help expand the financial resources of developing economies so they can achieve green, resilient, and inclusive development,” she said.
After rebounding to an estimated 5.5 percent in 2021, global growth is expected to decelerate markedly to 4.1 percent in 2022. Moreover, Global growth is projected to soften further to 3.2 percent in 2023, as pent-up demand wanes and supportive macroeconomic policies continue to be un-wound.
Growth in most EMDE regions in 2022-23 is projected to revert to the average rates during the decade prior to the pandemic, with the exception of East Asia and Pacific. Half or more of economies in East Asia and Pacific, Latin America and the Caribbean, and the Middle East and North Africa, and two-fifths of economies in Sub-Saharan Africa, will still be below their 2019 per capita GDP levels by 2023.