Developing Countries At Risk From Global Economic Threats, Says World Bank | Global economy

The risk of a hard landing for much of the global economy is increasing as countries struggle to cope with the triple threat of COVID-19, inflation and higher interest rates, the World Bank warned.

In its semi-annual forecasts, the Washington DC-based Bank said it expected a “pronounced slowdown” in growth over the next two years, with the less affluent parts of the world especially hard hit.

David Malpass, president of the World Bank, called for action to reduce the debts of poor countries and said he was “very concerned” about the permanent scars on development caused by the pandemic.

He said: “The world economy is simultaneously facing Covid-19, inflation and political uncertainty, with public spending and monetary policies in uncharted territory. Growing inequality and security challenges are particularly damaging for developing countries ”.

With the Bank forecasting a growth slowdown from 5.5% in 2021 to 4.1% this year and 3.2% in 2023, Malpass added: “Putting more countries on a favorable growth path requires concerted international action. and a comprehensive set of national policy responses ”.

The Bank said the rapid spread of the Omicron variant suggested that the pandemic was likely to continue to disrupt economic activity in the near term, while a marked slowdown in the world’s two largest economies, the US and China, would slow down. exports from emerging and developing economies. .

“At a time when governments in many developing economies lack the political space to support activity if necessary, new Covid-19 outbreaks, persistent supply chain bottlenecks and inflationary pressures, and Elevated financial vulnerabilities in large parts of the world could increase the risk of a hard landing, ”the report says.

Malpass said many countries were already facing a “hard landing” in education, noting that in poor countries the number of 10-year-olds unable to read a plain text had risen from 53% to 70% in the poor countries. last two years.

“Deep debt relief is needed,” Malpass added. “If we wait too long, it will be too late and it will not be successful.”

The Bank said growth in advanced economies was expected to decline from 5% in 2021 to 3.8% in 2022 and 2.3% in 2023, a pace of expansion that would still be sufficient to restore production and investment. to its pre-pandemic trend. By the end of next year, all advanced economies are expected to have achieved a full output recovery.

Growth rates in emerging and developing economies are expected to fall from 6.3% in 2021 to 4.6% in 2022 and 4.4% in 2023, leaving production 4% below its target. pre-pandemic trend. For fragile and conflict-affected countries, production would be 7.5% lower than the pre-pandemic trend, while for small island states it would be 8.5% lower.

The Bank said rising inflation, which particularly affects low-income workers, was restricting monetary policy.

“Globally and in advanced economies, inflation is at the highest rates since 2008. In emerging market and developing economies, it has reached its highest rate since 2011. Many emerging and developing economies are withdrawing support. of policies to contain inflationary pressures, long before inflation occurs. recovery is complete. “

At a time when immunization rates in the world’s poorest countries are below 10%, the World Bank said the immediate priority was to ensure that vaccines were more widely implemented.

But he said there is also a need for long-term support to deal with setbacks in development progress, such as rising inequality.

“In a time of great debt, global cooperation will be essential to help expand the financial resources of developing economies so that they can achieve green, resilient and inclusive development,” said Mari Pangestu, Managing Director of Development Policies and Partnerships. from the bank.