Countries must take decisive actions and key policy initiatives to reverse declining economic growth and achieve sustainable recovery, the World Bank Group advised yesterday.
The bank blamed the destabilising shocks in global economies to the more than two years of the COVID-19 pandemic and the war in Ukraine, which it noted, worsened the slowdown in global growth.
In a report released yesterday and titled: “Careful calibrations: Narrow path for global recovery requires decisive action”, chief economist and director of the World Bank’s Prospects Group, Ayhan Kose, said a decisive and wide-ranging policy response will be needed to boost growth and mitigate the multiple risks confronting the global economy.
He disclosed that against this gloomy background, the path for a sustained recovery is becoming increasingly narrow, requiring decisive global and national policy actions.
Kose said: “This will involve global efforts to limit the harm to those affected by the war in Ukraine, to cushion the blow from surging oil and food prices, to speed up debt relief, and to expand vaccinations in low-income countries.
“It will also involve refraining from distortionary policies such as price controls and export bans, which could worsen the recent increase in commodity prices.”
He said that the challenging combination of higher inflation, weaker growth, tighter financial conditions, and limited fiscal policy space will also require reprioritising spending toward targeted relief for vulnerable populations.
The World Bank official said: “The narrow path to recovery will once again test the resilience of the global economy. It is not easy to quickly implement these policy prescriptions.
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“However, delaying the necessary measures would have painful consequences. Policymakers need to act now to carefully calibrate policies, design credible macroeconomic frameworks, and clearly communicate the measures they plan to implement.”
The bank chief said the world economy is expected to experience its sharpest deceleration following an initial recovery from a global recession in more than 80 years.
He said: “Global growth is projected to slow from 5.7 percent in 2021 to 2.9 percent in 2022 — significantly lower than the 4.1 per cent that was anticipated in January.
“Global growth is expected to hover around that pace over 2023-24, as the war in Ukraine disrupts activity, investment, and trade; pent-up demand fades; and fiscal and monetary policy accommodation is withdrawn.”
“In advanced economies, growth is projected to decelerate sharply from 5.1 per cent in 2021 to 2.6 per cent in 2022. Growth is expected to further moderate to 2.2 percent in 2023, largely reflecting the further unwinding of the fiscal and monetary policy support provided during the pandemic,” Kose said.
According to him, “growth in emerging market and developing economies is projected to roughly halve this year, slowing from 6.6 percent in 2021 to 3.4 per cent in 2022—well below its annual average of 4.8 percent over 2011-19.
“Also, forecasts for the 2022 growth have been revised down in 70 per cent of these emerging market and developing economies, including most commodity importing countries as well as four-fifths of low-income countries.
“The global outlook is subject to various interlinked downside risks. Intensifying geopolitical tensions could further disrupt economic activity, generate policy uncertainty and, if persistent, lead to fragmentation in global trade, investment and financial systems.”