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World Bank Warns Of ‘Stagflation” Risk

The World Bank on Tuesday has warned that due to Russian invasion in Ukraine has worsened the damage from Covi-19 pandemic and marked down its global growth forecast by nearly a third to 2.9% for 2022.The World Bank said in its Global Economic prospects report that the war in Ukraine has maximized the slowdown in the global economy, which would become “protected period of feeble growth and elevated inflation.”

World bank President David Melpass said in a news conference that global growth could fall to 2.1% in 2022 and 1.5% in 2023, driving per capita growth close to zero, if downside risks materialized. He further added that global growth is being effected by the war, fresh COVUD lockdowns in China, supply-chain disturbances and the rising risk of stagflation—a period of weak growth and high inflation which was last seen in 1970s.  

Malpass wrote in the foreword to the report that the risk of stagflation is substantial today and that repressed development will probably continue all for decades due to weak investments throughout the world. With inflation currently running at multi-decade highs in numerous nations and supply expected to develop gradually, there is a gamble that inflation will stay higher for longer. Also between year 2021-2024 the global growth is projected to slow by 2.7% more than twice the downfall seen between 1976 and 1979.

To reduce the risks Melpas said that policy makers should work together to coordinate aid for Ukraine by boosting food and energy production and avoid useless import export restrictions that could further lead to spikes in oil and food prices. He also called for efforts to speed up the transition to a low carbon economy to take measures for debt relief warning that some middle-income countries were potentially at risk.