2022 Recession World Bank Highlights
World Bank's latest Global Economic Prospects report raises the risk of stagflation. Growth is expected to slump from 5.7 percent in 2021 to 2.9 percent in 2022. As a result of the damage from the pandemic and the war, the level of per capita income in developing economies this year will be nearly 5 percent below its pre-pandemic trend. Developing economies will have to balance the need for fiscal sustainability with the need to mitigate the effects of today's overlapping crises on their poorest citizens. Changes in fiscal, monetary, climate, and debt policy are needed to counter capital misallocation and inequality.
Emerging markets and developing economies face vulnerabilities concerning the monetary policy tightening that will be needed to rein in inflation. Central banks in advanced economies and many developing economies now have clear mandates for price stability. The report also offers fresh insights on how the war in Ukraine is clouding the global growth outlook. Global inflation is expected to moderate next year but it will likely remain above inflation targets in many economies. Growth in advanced economies is projected to decelerate from 5.1 percent in 2021 to 2.6 percent in 2022.
The US data indicated that consumers were feeling the effects of high inflation and rising interest rates, which led to lower demand from both manufacturers and service providers. Manufacturing in Europe was the primary cause of the decline, but a post-lockdown recovery in services like tourism nearly came to a complete halt.
Among emerging markets and developing economies, growth is also projected to fall. The report highlights the need for decisive global and national policy action to avert the worst consequences of the war in Ukraine.
