World Bank Lowers Global Economic Growth Forecast to 4.1% This Year... Projects 3.2% for Next Year

[Photo by Reuters-Yonhap News]

[Asia Economy Reporter Park Byung-hee] The World Bank (WB) has downgraded its global economic growth forecast for this year to 4.1%, the Wall Street Journal reported on the 11th (local time). Unlike advanced economies, the WB expressed concerns that emerging and developing countries will still not recover to pre-COVID-19 pandemic levels by next year, widening the gap between advanced economies and emerging and developing countries.

In its global economic outlook report released on the same day, the WB predicted that the global growth rate, which was 5.5% last year, will significantly slow to 4.1% this year and 3.2% next year.

This year's growth forecast is 0.2 percentage points lower than the WB's prediction in its June report last year. The estimated growth rate for last year was also revised down by 0.2% compared to previous estimates.

This is due to the base effect of a strong economic rebound last year following the COVID-19 pandemic, the burst of suppressed demand during the pandemic, and the gradual fading of the effects of large-scale fiscal and financial policies. Furthermore, the rapid spread of the COVID-19 Omicron variant is expected to continue disrupting economic activities. The slowdown in growth rates in the U.S. and China is also expected to weigh on external demand generation for emerging and developing countries.

Chief Economist Ayhan Kose warned that if the Omicron surge continues, the global economic outlook could fall by 0.7 percentage points to as low as 3.4%. He also predicted that if major economies, including the U.S., raise benchmark interest rates faster than expected this spring, the growth forecast could be further downgraded.

The WB expressed concerns that if governments in developing and emerging countries lack the policy capacity to support necessary activities, risks of a hard landing could increase due to new COVID-19 outbreaks, persistent supply chain bottlenecks, inflationary pressures, and increased financial vulnerabilities.

David Malpass, President of the WB, stated, "The global economy is simultaneously facing COVID-19, inflation, and policy uncertainty while government spending and monetary policy remain uncharted territory," calling for international cooperation and comprehensive policy responses.

The WB expects growth rates in advanced economies to slow from 5% last year to 3.8% this year and 2.3% next year. Growth rates for emerging and developing countries are also forecasted to decline from 6.3% last year to 4.6% this year and 4.1% next year.

The WB anticipates that all advanced economies will fully recover their productive capacity compared to pre-pandemic levels by next year, but emerging and developing countries will lag behind by about 4% compared to pre-pandemic trends, widening the gap between advanced and less developed countries.

Chief Economist Kose diagnosed that "a severe economic slowdown is underway," with the global economy following two different paths: advanced economies soaring while emerging and developing countries lag behind, adding that "numerous risks are lurking."

The growth forecasts for the U.S. and China this year were also revised downward compared to the June forecast last year.

The U.S., estimated to have grown 5.6% last year, is now forecasted to grow 3.7% this year, down 0.5 percentage points from the previous forecast.

China's growth forecast for this year is 5.1%, 0.3 percentage points lower than the June forecast last year. China's growth rate last year was estimated at 8.0%.

The Eurozone's growth rate for this year is 4.2%, down 0.2 percentage points from the previous forecast. Japan's growth rate was revised up by 0.3 percentage points to 2.9%.

The WB forecasted the growth rate for East Asia and the Pacific, including Korea and China, at 5.1% this year and 5.2% next year. Growth forecasts for Europe and Central Asia are 3.0% this year and 2.9% next year, while South Asia is expected to grow 7.6% this year and 6.0% next year.

This content was produced with the assistance of AI translation services.