The global economy faces a long period of weak growth and high inflation reminiscent of the 1970s as the impact of a two-year pandemic is worsened by Russia’s invasion of Ukraine, the World Bank has warned.
“The war in Ukraine, lockdowns in China, supply chain disruptions and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” the bank’s president David Malpass said.
The World Bank said its global economic prospects report was the first systematic attempt to compare the current state of the world economy with those during the stagflation of the 1970s. The Washington based institution was forced to cut its growth forecast for this year from 4.1% to 2.9%.
According to the bank the slowdown in growth between 2021 and 2024 was on course to be twice that of the period between 1976 and 1979. Then, the high inflation that followed the oil shocks required steep increases in interest rates.
According to the bank’s report, global growth is expected to slump from 5.7 percent in 2021 to 2.9 percent in 2022— significantly lower than 4.1 percent that was anticipated in January.
Global inflation is expected to moderate next year but it will likely remain above inflation targets in many economies.