Stagflation Danger Sees World Bank Cut Global Growth Outlook

The World Bank cut its forecast for global economic expansion in 2022 further, warning that several years of above-average inflation and below-average growth lie ahead with potentially destabilizing consequences for low- and middle-income economies. 

“The world economy is again in danger,” President David Malpass said in the foreword of the latest edition of the lender’s Global Economic Prospects report released Tuesday. “It is facing high inflation and slow growth at the same time. Even if a global recession is averted, the pain of stagflation could persist for several years -- unless major supply increases are set in motion.” 

The Washington-based lender reduced its estimate for global growth this year to 2.9% from a January prediction of 4.1% and April’s 3.2% estimate due to a surge in energy and food prices, supply disruptions triggered by Russia’s invasion of Ukraine and a drive by central banks globally to increase interest rates from rock-bottom levels. 

The world economy expanded 5.7% in 2021 after the Covid-19 pandemic triggered the deepest global recession since World War II.