by Andrea Shalal
WASHINGTON (Reuters) – The World Bank (WB) on Tuesday revised down its economic growth forecasts for the United States, the euro zone and China, and it warned of the risk of seeing public debts, the widening inequalities and new variants of COVID-19 threaten the recovery in emerging countries.
The international organization explains that it anticipates a phase of “pronounced slowdown” which would reduce global growth to 4.1% this year after 5.5% last year, then to 3.2% in 2023, the positive effect of the catching-up. gradually dissipating demand and plans for monetary and fiscal support.
Its forecast for 2021 and 2022 has been reduced by 0.2 percentage point from those presented last June.
The International Monetary Fund (IMF), for its part, should also lower its forecasts, which it postponed publication to January 25 in order to incorporate the expected impact of the surge of the Omicron variant of the coronavirus.
For the World Bank, after the strong rebound in economic activity observed in 2021 in advanced countries as well as in emerging and developing countries, growth risks being hampered in 2022 by inflation and the tensions in the supply chains. supply, labor shortages and the emergence of new variants of the coronavirus.
“A sharp slowdown is underway,” Ayhan Kose, director of the Washington-based organization’s outlook department, told Reuters. “Support for monetary and fiscal policies is dwindling and we face a multitude of risks.”
The rapid spread of the Omicron variant proves that the recovery remains subject to significant risks from the pandemic, he added, explaining that congestion in health systems could cut global growth by 0.7 percentage point extra in the worst case.
According to data compiled by Reuters, COVID-19 has killed more than 5.8 million people worldwide and while 59% of the world’s population has received at least one dose of the vaccine, this proportion drops to just 8.9% for low-income countries according to the Our World in Data website.
For Ayhan Kose, the pandemic has had the effect of widening the growth gaps between advanced and developing countries as well as internal inequalities in each country, which could cause social and political tensions.
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The risk of a “hard landing” for developing countries increases due to their reduced ability to provide additional budget support to their populations, inflationary pressures and financial weaknesses, he said.
The World Bank predicts that growth in advanced economies will return to 3.8% this year after 5% in 2021 and that it will continue to slow in 2023, to 2.3%.
For the United States, it reduced its forecast for gross domestic product (GDP) growth for 2021 by 1.2 points, to 5.6%, and expects 3.7% for 2022 then 2.6% for 2023 .
China, the world’s second-largest economy, is expected to rebound 8% in 2021, half a point lower than expected in June, but growth is expected to return to 5.1% in 2022 and 5.2% in 2023.
In the euro zone, growth is expected at 5.2% for 2021 but it should slow to 4.2% this year and then to 2.1% next year.
Growth in emerging and developing countries is forecast at 4.6% for 2022 against 6.3% in 2021 and 4.4% for 2023, which would imply that their overall GDP would remain 4% below its previous level. the pandemic.
Rising interest rates constitute an additional risk and could slow growth, especially if the United States and other major economies begin this movement in the spring, so earlier than initially expected, also explained Ayhan Kose.
He added that the pandemic had raised global debt to its highest level in half a century and therefore concerted efforts were needed to speed up debt restructuring of stressed countries, involving private creditors.
The pandemic, he continued, has sharply increased inequalities in income, access to health and growth while promoting job destruction, a movement that primarily affects women, the low-skilled. and informal workers, he continued.
“This development could leave lasting scars,” he said, explaining that the damage suffered by education systems could affect human capital for several generations.
(Report Andrea Shalal, with David Lawder, French version Marc Angrand, edited by Sophie LOuet)
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