The latest Global Economic Prospects report features analytical sections that provide fresh insights into three emerging obstacles to a durable recovery in developing economies. Many emerging and developing economies are withdrawing policy support to contain inflationary pressures-well before the recovery is complete. In emerging market and developing economies, it has reached its highest rate since 2011. Globally and in advanced economies, inflation is running at the highest rates since 2008. Meanwhile, rising inflation-which hits low-income workers particularly hard-is constraining monetary policy. For many vulnerable economies, the setback is even larger: output of fragile and conflict-affected economies will be 7.5 percent below its pre-pandemic trend, and output of small island states will be 8.5 percent below.
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By 2023, all advanced economies will have achieved a full output recovery yet output in emerging and developing economies will remain 4 percent below its pre-pandemic trend. In emerging and developing economies, however, growth is expected to drop from 6.3 percent in 2021 to 4.6 percent in 2022 and 4.4 percent in 2023. Growth in advanced economies is expected to decline from 5 percent in 2021 to 3.8 percent in 2022 and 2.3 percent in 2023-a pace that, while moderating, will be sufficient to restore output and investment to their pre-pandemic trend in these economies. The slowdown will coincide with a widening divergence in growth rates between advanced economies and emerging and developing economies. “Putting more countries on a favorable growth path requires concerted international action and a comprehensive set of national policy responses.” Rising inequality and security challenges are particularly harmful for developing countries,” said World Bank Group President David Malpass. “The world economy is simultaneously facing COVID-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory. At a time when governments in many developing economies lack the policy space to support activity if needed, new COVID-19 outbreaks, persistent supply-chain bottlenecks and inflationary pressures, and elevated financial vulnerabilities in large swaths of the world could increase the risk of a hard landing.
In addition, a notable deceleration in major economies-including the United States and China-will weigh on external demand in emerging and developing economies. The rapid spread of the Omicron variant indicates that the pandemic will likely continue to disrupt economic activity in the near term. Global growth is expected to decelerate markedly from 5.5 percent in 2021 to 4.1 percent in 2022 and 3.2 percent in 2023 as pent-up demand dissipates and as fiscal and monetary support is unwound across the world. 11, 2022-Following a strong rebound in 2021, the global economy is entering a pronounced slowdown amid fresh threats from COVID-19 variants and a rise in inflation, debt, and income inequality that could endanger the recovery in emerging and developing economies, according to the World Bank’s latest Global Economic Prospects report. Spread of COVID-19 Variants Alongside Inflation, Debt, and Inequality Intensifies Uncertainty
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