The World Bank has joined this Tuesday the chorus of voices that ask the Government to rethink its measures to deal with the escalation in energy prices and a much more selective approach to aid to cushion this impact. The appeal to this strategic shift has not been direct in this case, but it has been forceful. The global economic outlook report released this Tuesday by the institution severely questions the governments that have chosen to respond to the rise in energy prices with energy subsidies to cushion their impact about homes.
“Policy responses to past energy ‘shocks’ show that some policies can be very effective and beneficial, such as increasing energy efficiency or boosting renewable energy, while others can lead to market distortions and environmental problems, such as measures of price control”, maintains the report, which then specifies what it refers to.
“To cushion the impact on households, temporary and selective support for vulnerable groups should be prioritized over energy subsidieswhich, in a context like the current one, can delay the transition to a decarbonized economy«.
The World Bank’s message implies a slap on the wrist to the economic policy response applied by the Government, which has not only tackled a very costly policy of tax cuts to reduce the cost of electricity bills for families, but has also approved a linear bonus of 20 cents per liter on the price of fossil fuels and last, not without problems, with the European Commission one more reform to cap the price of gas in the Iberian market, another price control measure, like those questioned by the body.
The World Bank’s economic outlook report, which does not give forecasts for Spain, applies a cut of 1.3 points to global growth in 2022 (from 4.1% to 2.9%) and an even more relevant one, of 1, 7 points, to the growth of the euro area (from 4.2% to 2.5%). In fact, he points out the euro area as the major economic region most affected due to the effects of the war in Ukraine.
The World Bank understands that the passing of the months is increasing the risk that the inflationary episode will not subside in the second half of this year, as predicted by the consensus of analysts, but rather extends well into 2023, and also points to the growing risk of global stagflation like the one that occurred in the oil crisis of the 1970s. The concept defines an episode of high inflation with no growth, which has very negative effects on the well-being of citizens and translates into a general and permanent impoverishment of the population.
George is Digismak’s reported cum editor with 13 years of experience in Journalism