The World Bank has cut its forecast for global economic growth in 2022, saying COVID-19 flare-ups, supply chain shortages, and waning government support have resulted in a “pronounced slowdown” of the recovery from the pandemic.
In its latest Global Economic Prospects report, the bank was less bullish than it was in June, when it forecast 5.6% growth for 2021 and 4.3% this year. Those forecasts assumed advanced economies would have their populations vaccinated by year-end, and a number of major emerging market and developing economies (EMDEs) also would make significant vaccination progress.
On Tuesday, the bank projected growth would decelerate “markedly” in 2022 to 4.1% from 5.5% last year, and soften further to 3.2% in 2023 “as pent-up demand wanes and supportive macroeconomic policies continue to be unwound.”
“The near-term outlook for global growth is somewhat weaker, and for global inflation notably higher, than previously envisioned, owing to pandemic resurgence, higher food and energy prices, and more pernicious supply disruptions,” the bank said.
While output and investment in advanced economies are expected to return to pre-pandemic levels next year, they will remain “markedly below” in EMDEs, due to lower vaccination rates, tighter fiscal and monetary policies, and “more persistent scarring” from the pandemic, according to the report.
“There is a pronounced slowdown underway,” Ayhan Kose, director of the World Bank’s Prospects group, told Reuters. “Policy support is being withdrawn and there is a multitude of risks ahead of us.”
He also said a COVID surge that overwhelmed healthcare systems could knock up to an additional 0.7 further percentage point off the global growth forecast.
For the U.S., the bank predicted sharply lower growth of 3.7% in 2022 and 2.6% in 2023.
Growth in advanced economies is expected to decline to 3.8% in 2022 from 5% in 2021, and drop further to 2.3% in 2023, while in EMDEs, the forecast is a decline to 4.6% in 2022 from 6.3% in 2021, with growth edging lower to 4.4% in 2023.