Many countries risk slipping into recession due to Ukraine crisis and supply chain disruption, says David Malpass
The World Bank on Tuesday slashed global economic growth forecasts for 2022 due to the Russia-Ukraine war and supply chain disruption, with many countries at risk of sliding into recession.
The financial institution estimates the growth of the global economy at 2.9% for this year, 1.2 percentage points less than its January forecast. Global growth is expected to fall from 5.7% in 2021 to 2.9% in 2022.
The economy is expected to “hover around this pace in 2023-24 as the war in Ukraine disrupts near-term activity, investment and trade, pent-up demand fades, and fiscal and monetary policy accommodation is withdrawn,” said the Global Economic Prospects Report released on Tuesday.
“The war in Ukraine, lockdowns in China, supply chain disruptions and the risk of stagflation are hammering growth. For many countries, recession will be difficult to avoid,” said World Bank Group President David Malpass.
“Markets look to the future, so there is an urgent need to encourage production and avoid trade restrictions. Changes in fiscal, monetary, climate and debt policies are needed to tackle capital misallocation and inequality,” he said.
He said the global economy is expected to experience its steepest deceleration after the first recovery from the global recession in more than 80 years.
The World Bank has warned that the pandemic and war in Europe are increasing the risk of stagflation, with potentially damaging consequences for middle-income and low-income economies.
He warned that inflation is expected to moderate next year around the world, but is likely to remain above inflation targets in many economies. The report notes that if inflation remains high, a repeat of the resolution of the previous stagflation episode could result in a sharp global slowdown accompanied by financial crises in some emerging markets and developing economies.
The report forecast a sharp deceleration in growth in advanced economies from 5.1% in 2021 to 2.6% in 2022, 1.2 percentage points lower than the January projections. Growth is expected to moderate further to 2.2% in 2023.
For emerging and developing countries, growth is also expected to fall from 6.6% in 2021 to 3.4% in 2022, well below the annual average of 4.8% over the period 2011-2019.
UAE: Sustained growth in 2023-24
The UAE’s economy is expected to grow by 4.7% this year and at a sustainable growth rate over the next two years, benefiting from high crude oil prices and the level of production.
The global financial institution predicted growth of 3.4% and 3.6% for the UAE in 2023 and 2024, respectively.
Earlier this week, the UAE Central Bank predicted 5.4% growth for 2022. The Emirates’ current account surplus fell from Dh77.5 billion in 2020 to Dh176.2 billion in 2021, due to increased oil and non-oil exports. , in addition to a rise in the services balance surplus.
“The UAE should also benefit in the short term from higher oil prices, while in the medium term, reforms aimed at deepening capital markets, increasing labor market flexibility and accelerating innovation technology will support growth,” the World Bank said.
Among oil-exporting GCC countries, which also tend to have higher vaccination rates, higher oil prices and rising production have helped maintain robust rebounds, partly offset by higher prices food and borrowing costs. Gulf countries’ daily oil production was about three million barrels higher than a year ago in April, the World Bank said.
For the Mena region, the World Bank has projected average growth of 5.3% in 2022, its fastest pace in a decade, but growth will slow sharply in 2023 and 2024 across the region.
“The current rebound is mainly due to strong growth in oil exporters, spurred by rising oil revenues and a general decrease in the adverse effects of the pandemic in highly vaccinated countries. GCC economies are expected to grow by 5.9% in 2022, 1.2 percentage points higher than expected at the start of the year,” he said.