Economy
By Kennedy Nnamani
THE World Bank has lamented that the ongoing war in Ukraine is leading to become a protracted period of feeble growth and elevated inflation.
In a statement on Tuesday, the bank regretted that the invasion of Ukraine by Russia has added to the compounding damage from the COVID-19 pandemic to slowdown the global economy
The World Bank quoted its Global Economic Prospects report and projected that this trend raises the risk of stagflation with potentially harmful consequences for middle- and low-income economies alike.
According to the projections in the statement, global growth is expected to slump from 5.7 percent in 2021 to 2.9 percent in 2022, which translates to lower than 4.1 percent that was anticipated in January.
“It is expected to hover around that pace over 2023-24, as the war in Ukraine disrupts activity, investment and trade in the near term, pent-up demand fades, and fiscal and monetary policy accommodation is withdrawn.
“As a result of the damage from the pandemic and the war, the level of per capita income in developing economies this year will be nearly 5 percent below its pre-pandemic trend,” it said.
In his words, David Malpass, World Bank President noted that with the lockdown in China, war in Ukraine andsupply-chain disruptions, it will be hard for many countries to avoid recession.
In the same vein, Ayhan Kose,Director of the World Bank’s Prospects Group advised thatdeveloping 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
He said that “communicatingmonetary policy decisions clearly, leveraging credible monetary policy frameworks, and protecting central bank independence can effectively anchor inflation expectations and reduce the amount of policy tightening required to achieve the desired effects on inflation and activity.”
According to the statement, global inflation is expected to moderate next year, but it will likely remain above inflation targets in many economies.
It also disclosed that if the inflation remains elevated, a repeat of the resolution of the earlier stagflation episode could translate into a sharp global downturn along with financial crises in some emerging markets and developing economies.
In the statement, among emerging market and developing economies, growth is also projected to fall from 6.6 percent in 2021 to 3.4 percent in 2022—well below the annual average of 4.8 percent over 2011-2019.
Meanwhile, the World Bank highlighted the need for decisive global and national policy action to avert the worst consequences of the war in Ukraine for the global economy.
It therefore advised that policymakers should refrain from distortionary policies such as price controls, subsidies and export bans, which could worsen the recent increase in commodity prices.
“Against the challenging backdrop of higher inflation, weaker growth, tighter financial conditions, and limited fiscal policy space, governments will need to reprioritize spending toward targeted relief for vulnerable populations,” it said.
KN
Tags: Ayhan Kose David Malpass Kennedy Nnamani
