World Bank paints a bleak picture for global economic recovery as Covid-19 persists

The World Bank's 2022 Global Prosepects Report has warned that the global economy is entering a "pronounced slowdown" amid fresh threats from Covid-19 variants and a significant rise in inflation, debt, and income inequality. The slowdown, the report reads, could endanger post-pandemic recovery in emerging and developing economies.

Supply chain bottlenecks that threaten to hobble the global recovery will be a focus of discussion at the annual meetings of the World Bank and IMF MANDEL NGAN AFP/File

The report, which was published today, indicates that gobal growth is expected to decrease from 5.5 percent in 2021 to 4.1 percent in 2022 as fiscal and monetary support is rolled-out around the world in the wake of the coronavirus pandemic.

The rapid spread of the Omicron variant has shown that the Covid pandemic will continue to disrupt economic activity globally for the foreseeable future.

The World Bank predicts that the economic slowdown will continue well into 2023, with a further deceleration of 3.2 percent. 

The bank has also warned of a vicious cycle that could aggravate the the situation, as recovery of major economies - including the United States and China - will weigh significantly on emerging and developing markets.

Recovery under the spotlight

The bleak outlook comes at a time when governments in many developing economies lack a coherent economic policy to support or boost economic activity.

The 2022 Global Prospects report also stresses that new Covid-19 outbreaks, along with supply-chain problems and high inflation, will expose the vulnerabilities of emerging economies

World Bank President David Malpass believes that the planet's economy is now entering uncharted territory: “The world economy is simultaneously facing Covid-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory," he said in a statement.

"Rising inequality and security challenges are particularly harmful for developing countries. Putting more countries on a favorable growth path requires concerted international action and a comprehensive set of national policy responses.”

The impact of the #COVID19 pandemic is largest for the world’s poorest. Vulnerable groups, including women, workers with low education, and those informally employed in urban areas, were hit particularly hard.
Read more in our #YearInReview: https://t.co/5K8N9tHK49 pic.twitter.com/n7VAoi48ZF

— World Bank Poverty (@WBG_Poverty) January 3, 2022

Global inflation hits record highs

The predicted slowdown coincides with a widening gap in growth rates between advanced economies and emerging and developing economies.

Growth in emerging and developing economies is expected to drop from 6.3 percent in 2021 to 4.4 percent in 2023.

By 2023, all advanced economies will have achieved a full output recovery, but output in emerging and developing economies will remain four  percent below its pre-pandemic levels.