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World Bank Warns of Slowing Economy Amid COVID Surge

Chris Gaetano
Published Date:
Jan 11, 2022
Global Economy Earth Money

The World Bank warned that global economic growth, which was strong in 2021, is expected to slow in 2022 and get even worse in 2023, increasing the possibility of a "hard landing" for developing countries. This is due to the rapid spread of the new Omicron COVID-19 variant, which the institution expects will kneecap demand, just as fiscal and monetary support has started to wind down. Overall, global growth is expected to decelerate markedly from 5.5 percent in 2021 to 4.1 percent in 2022 and 3.2 percent in 2023. 

“The world economy is simultaneously facing COVID-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory. Rising inequality and security challenges are particularly harmful for developing countries,” said World Bank Group President David Malpass. “Putting more countries on a favorable growth path requires concerted international action and a comprehensive set of national policy responses.”

This will be especially difficult for economies outside the wealthier nations. The World Bank estimates that, despite slowing growth, advanced economies will have restored output and investment to their pre-pandemic trend by 2023; conversely, by this same time, the output in less wealthy countries is expected to drop to 4 percent below its pre-pandemic trend. And in fragile and conflict-affected economies output will drop to  7.5 percent below its pre-pandemic trend,

The report also noted that the pandemic has pushed global debt levels to their highest in half a century, meaning that future coordinated debt relief initiatives (i.e., to other countries, as the World Bank primarily lends to nation states) will be more difficult in the future. It also warned of growing inequality, not just in terms of economic growth but also in terms of access to education and health care, as well as the scale of job and income losses, which have been higher for women and low-skilled and informal workers.

"This trend has the potential to leave lasting scars: for example, losses to human capital caused by disruptions in education can spill over across generations," said the World Bank.

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