Global growth will slow until 2023 (World Bank)

Global growth is expected to slow significantly to 4.1% in 2022 and 3.2% in 2023, vs 5.5% in 2021, as a result of the slowing down of demand catching up and the withdrawal of budgetary and monetary support measures across the world.

The rapid spread of the Omicron variant suggests that the pandemic will likely continue to disrupt economic activity in the near term. In addition, the notable deceleration recorded in major economies (including the United States and China) will weigh on external demand in emerging and developing economies. While the governments of many developing countries do not have sufficient leeway to sustain activity when needed, the threat posed by further outbreaks of COVID-19, persistent bottlenecks in supply chains Supply and inflationary pressures, as well as high financial vulnerabilities in much of the world, are all factors that could increase the risk of a hard landing for these economies.

“The global economy is facing the combined effects of COVID-19, inflation and an uncertain environment, as public spending and monetary policies enter uncharted territory. Rising inequalities and security concerns are particularly damaging to developing countries, underline the President of the World Bank Group David Malpass. To enable more countries to position themselves on a favorable growth path, concerted action at the international level and a comprehensive arsenal of measures at the national level are essential. “

The global economic slowdown will be accompanied by a gradual divergence in growth rates between advanced economies and emerging and developing economies.

The advanced economies are expected to see their growth rate decline from 5% in 2021 to 3.8% in 2022 and 2.3% in 2023. Although their progress is stalling, it will be sufficient to restore levels of production and production. investment in trends observed before the pandemic.

In emerging and developing economies, on the other hand, growth is expected to decline from 6.3% in 2021 to 4.6% in 2022 and 4.4% in 2023. By 2023, advanced economies will have fully recovered their position. pre-COVID production level, while the performance of emerging and developing economies will remain 4% below their pre-COVID trend. For many vulnerable economies, the setback is even greater: output in fragile and conflict-affected economies and small island states will be 7.5% and 8.5% below their pre-COVID trend, respectively.

At the same time, rising inflation, which hits low-income workers particularly hard, is hampering monetary policy measures. Globally and in advanced economies, inflation is at its highest level since 2008.

In emerging and developing economies, it has reached a record level since 2011. In order to contain inflationary pressures, many emerging and developing economies are withdrawing their stimulus support measures even though the recovery is still a long way off to be acquired.

The last Global economic outlook devote detailed analyzes to three obstacles that threaten the achievement of a sustainable recovery in developing economies. The first of these three chapters, dedicated to debt, offers a comparison between the international efforts underway to remedy unsustainable debt situations in developing economies – namely the G20 common framework – and the initiatives coordinated by the past to facilitate sovereign debt relief.

Stressing that COVID-19 has pushed total global debt to its highest level in 50 years, amid growing complexity in the composition of creditors, the report warns of the heightened challenges facing future debt relief efforts. debt. Applying the lessons learned from previous restructuring processes to the G20 common framework will increase its effectiveness and avoid the loopholes that have been plagued by previous initiatives.

“The choices that political decision-makers will make in the next few years will be decisive for the next decade, assures Mari Pangestu, World Bank Managing Director for Development Policy and Partnerships. The immediate priority is to ensure a wider and equitable deployment of vaccines in order to successfully curb the pandemic. But sustained support will also be needed to redress the setbacks on the development front, including rising inequalities. In a context of high debt, global cooperation will be essential to help increase the financial resources of developing economies so that they can achieve green, resilient and inclusive development. “

The second special feature examines the impact of large fluctuations in commodity prices for emerging and developing economies, most of which rely heavily on commodity exports. These cyclical swings have been particularly intense over the past two years, when commodity prices collapsed with the onset of COVID-19, before skyrocketing in 2021 and in some cases reaching levels. historical.

The pendulum swings in commodity markets are likely to continue given the development of the global macroeconomic situation and supply-side factors. For many commodities, they are also likely to increase as a result of climate change and the energy transition to a shift away from fossil fuels. The analysis also shows that the magnitude of the boom phases since the 1970s has generally been greater than that of the drop in prices.

This opens up considerable prospects for more sustained and sustainable growth in commodity-exporting countries, on condition that rigorous policies are adopted in times of rising prices to take advantage of this windfall.

Finally, the third analytical chapter examines the impact of COVID-19 on inequalities around the world. It shows how the pandemic has widened income inequality, partly reversing the progress made over the past two decades.

It has also exacerbated inequalities in many other areas affecting human development, including vaccine availability, economic growth, access to education and health care, and loss of jobs and resources. income, as women and low-skilled and informal workers were hit hardest. This rise in inequalities could leave lasting consequences: the losses of human capital caused by disruptions in education, in particular, can have repercussions for several generations.

“In view of the forecast for slower production and investment growth, limited room for maneuver and considerable downside risks, emerging and developing economies will need to carefully adjust their fiscal and monetary policies,” affirms Ayhan Kose, Director of the Outlook Department of the World Bank. They must also undertake reforms to erase the legacy of the pandemic. These reforms should focus on improving investment and human capital, addressing income and gender inequalities, and addressing the challenges of climate change. “


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