World Bank Cuts Global Growth Forecast on Virus Flare-Ups

Covid-19 flare-ups, diminished policy support, and lingering supply-chain bottlenecks will see the global economic recovery cool more than previously estimated in 2022, after last year’s expansion clocked the fastest post-recession pace in eight decades, the World Bank said.

Global gross domestic product will probably increase 4.1% this year, less than a 4.3% forecast in June, the Washington-based development organization said in its semi-annual Global Economic Prospects report Tuesday. By 2023, annual output is expected to remain below the pre-pandemic trend in all regions with emerging-market and developing economies, while in advanced economies, the gap is estimated to close, it said.

“There is there a serious slowdown underway,” Ayhan Kose, the chief economist of the Prospects Group at the institution, said in an interview. The global economy “is basically on two different flight paths: Advanced economies are flying high; emerging-market, developing economies are somewhat flying low and lagging behind.”

The global outlook is clouded by what World Bank Group President David Malpass termed “exceptional uncertainty.” Downside risks include renewed Covid-19 outbreaks, the possibility of de-anchored inflation expectations, and financial stress in a context of record-high debt levels, the bank said. In emerging markets with limited policy space to provide support, the risks heighten chances of a hard landing for their economies, it said.