COVID 19, Debt Intensifies Uncertainty As World Bank Projects Slow Global Growth Till 2023

Amid fresh threats from COVID-19 variants and a rise in inflation, debt, and income inequality, the global economy is entering a pronounced slowdown that could endanger the recovery in emerging and developing economies.

According to the World Bank’s latest Global Economic Prospects report, 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 rapid spread of the Omicron variant indicates that the pandemic will likely continue to disrupt economic activity in the near term. In addition, a notable deceleration in major economies, including the United States and China will weigh on external demand in emerging and developing economies.

World Bank Group’s 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.

“Putting more countries on a favorable growth path requires concerted international action and a comprehensive set of national policy responses.”

The slowdown, according to the World Bank, will coincide with a widening divergence in growth rates between advanced economies and emerging and developing economies. Growth in advanced economies is expected to decline from 5 percent in 2021 to 3.8 percent in 2022 and 2.3 percent in 2023.

However, in emerging and developing economies, growth is expected to drop from 6.3 percent in 2021 to 4.6 percent in 2022 and 4.4 percent in 2023.

According to the World Bank’s Managing Director for Development Policy and Partnerships, Mari Pangestu, the choices policymakers make in the next few 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. 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 in the report.

Meanwhile, the World Bank projects that growth will decelerate to 5.1% in 2022 before increasing slightly to 5.2% in 2023 in the East Asia and Pacific regions. For the Middle East and North African regions, growth is forecast to accelerate to 4.4% in 2022 before slowing to 3.4% in 2023.

Also, for Sub-Saharan Africa, growth is forecast to accelerate slightly to 3.6% in 2022 and rise further to 3.8% in 2023.