The World Bank presented recent warnings about the risk of stagflation and cut its global growth forecast to 2.9% for 2022, i.e., it lowered its projection by 1.2 percentage points. But it also warned that the economy could reach a slowdown of 2.7 percentage points between 2021 and 2024, which would be double that experienced between 1976 and 1976.
The organization also recalled that during those years, the rise in interest rates applied to control the rapid and high increase in prices caused the world recession in 1982, which at the same time provoked financial crises in emerging markets and developing countries.
“Subdued growth is likely to persist throughout the decade due to weak investment in most parts of the world,” the agency said in its Global Economic Prospects report.
“The danger of stagflation is considerable today,” it said.
“With inflation now at multi-decade highs in many countries, and supply growing slowly, there is a risk that inflation will remain high for longer,” it explained.
According to the agency, the war in Ukraine, following the Russian invasion, the latest blockades by Covid in China, and supply chain difficulties, deepen the slowdown in the global economy, which could cause slow growth to drag on for longer, and in a scenario of high prices.
For the President of the World Bank, David Malpass, to minimize these effects, it is necessary above all to counteract the increase in oil and food prices, strengthen efforts to contain outbreaks of Covid, and he also stressed the need to coordinate aid to Ukraine.
In Latino America the Regional gross domestic product (GDP) will grow 2.5% in 2022, close to the 2.6% projected in January, but drastically below the 6.7% recovery in 2021 following the pandemic recession.
In 2023 the results will be even leaner, with GDP expansion of just 1.9%, before rebounding slightly to 2.4% in 2024, according to the World Bank’s (WB) latest Global Economic Prospects (GEP) report. This means High inflation, tighter financial conditions and political uncertainty are expected to affect domestically.