Global economic outlook report in June 2022 From World Bank

The following is the Global economic outlook report in June 2022 From World Bank recommended by recordtrend.com. And this article belongs to the classification: global economy , research report.

Global growth is expected to decline from 5.7% in 2021 to 2.9% in 2022, far lower than the 4.1% expected in January this year. As the conflict between Russia and Ukraine will continue to disrupt economic activities, investment and trade, the release of previously suppressed demand is gradually completed, and countries withdraw fiscal and monetary easing policies, the growth rate in 2023-24 is expected to remain at this level. Due to the destruction of the epidemic and war, the per capita income of developing economies this year will be nearly 5% lower than the trend level before the outbreak of the epidemic.

“The conflict between Russia and Ukraine, China’s epidemic prevention policy, supply chain disruption and the risk of stagflation are causing a heavy blow to economic growth. For many countries, economic recession will be inevitable,” World Bank President Marcus said

He pointed out that the market is forward-looking, so it is urgent to encourage production and avoid restricting trade. In order to solve the problem of capital mismatch and inequality, changes need to be made in many policy areas, such as finance, currency, climate and debt.

A new round of stagflation

In June, the global economic outlook for the first time systematically assessed the current global economic situation against the stagflation in the 1970s, especially the impact of stagflation on emerging markets and developing economies. In order to get rid of the stagflation in the 1970s, developed economies raised interest rates significantly, which became an important factor in triggering a series of financial crises in emerging markets and developing economies.

Aikhan Gauss, director of the forecasting Bureau of the world bank, said: “Developing economies must maintain a balance between ensuring fiscal sustainability and mitigating the impact of the current multiple crises on the poorest people. Clearly communicating monetary policy decisions, making full use of a reliable monetary policy framework and protecting the independence of central banks can effectively anchor inflation expectations and reduce the scale of policy tightening required to achieve the specific effects of controlling inflation and promoting economic activities.”  

Compared with the stagflation in the 1970s

The current economic situation is similar to that in the 1970s in three key aspects: the continuous supply side disruption pushed up inflation, while the major developed economies had adopted a long period of highly loose monetary policy; Slower growth prospects; The tightening of monetary policy required to control inflation will adversely affect emerging markets and developing economies.

However, there are many differences between the current situation and the 1970s: the US dollar is in a strong position, in sharp contrast to the severe weakness of the US dollar in the 1970s; The rise of commodity prices is smaller than that in the 1970s; The balance sheets of major financial institutions are generally in good condition. More importantly, unlike in the 1970s, stabilizing prices is now a clear mission of the central banks of developed and many developing economies, many of which have established a credible record of achieving inflation targets in the past 30 years.

Inflation is expected to fall next year

Global inflation is expected to decline next year, but inflation in many economies may still be higher than the inflation target. The report points out that if inflation continues to remain high and relevant countries adopt policies and measures like those to solve stagflation in the 1970s, the global economy may decline sharply and some emerging markets and developing economies will experience financial crises.

The impact of the conflict between Russia and Ukraine

The report also made a new analysis on how the impact of the conflict between Russia and Ukraine on the energy market will drag down the prospects for global growth.

The conflict between Russia and Ukraine has led to soaring prices of various energy commodities. Higher energy prices will lower real incomes, raise production costs, tighten financial conditions and constrain macroeconomic policy space, especially in energy importing countries.

It is expected that the growth rate of developed economies in 2022 will drop significantly to 2.6% from 5.1% in 2021, 1.2 percentage points lower than the forecast in January. It is expected that it will further slow down to 2.2% in 2023, mainly due to the further withdrawal of financial and monetary support during the new crown pandemic.

It is expected that the growth of emerging markets and developing economies will also decline from 6.6% in 2021 to 3.4% in 2022, far lower than the average annual growth rate of 4.8% from 2011 to 2019. Although the rise in energy prices has played a short-term role in boosting the growth of some commodity exporting countries, it can not offset the broad impact of the negative spillover effect of the Russia Ukraine conflict. The 2022 growth forecast for nearly 70% of emerging markets and developing economies has been lowered, including most commodity importing countries and four fifths of low-income countries.

proposal

The report emphasizes the need to take decisive policy actions at the global and national levels to avoid the most serious consequences of the Russian Ukrainian conflict on the global economy. This requires a concerted global effort to reduce the harm to war affected people, mitigate the impact of soaring oil and food prices, accelerate debt relief, and expand vaccination in low-income countries. The national level also needs to take measures to make a strong supply response while maintaining the good operation of the global commodity market.

In addition, policymakers should avoid implementing price controls, subsidies and export bans, which may exacerbate the rise in commodity prices. Against the grim background of rising inflation, slowing growth, tighter financial conditions and limited fiscal policy space, the government needs to redefine its spending priorities and provide targeted assistance to vulnerable groups.

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