LONDON - The global economy faces a ‘grim outlook’, World Bank president David Malpass has warned, as the aftershocks of the pandemic continue to weigh on growth - especially in poor countries.
His organization’s latest forecast predicts global growth will slow to 4.1% this year from 5.5% in 2021.
It attributed the slowdown to virus threats, government aid unwinding and an initial rebound in demand fading.
But Malpass said his greatest worry was widening global inequality.
“The big drag is the inequality that’s built into the system,” he said, noting that poorer countries were especially vulnerable to economic damage from efforts to fight inflation.
“The outlook for the weaker countries is still to fall further and further behind. That causes insecurity.”
By 2023, economic activity in all advanced economies, such as the US, Euro area and Japan, is likely to have recovered from the hit it took during the pandemic, the bank said.
But output in developing and emerging countries is expected to remain 4% lower than it was before COVID struck.
Malpass blamed stimulus programs in the richest countries for worsening the divide by driving global inflation. While officials in many countries, including the U.S., are now expected to raise interest rates to try to rein in price increases, Malpass warned higher borrowing costs could hurt economic activity - especially in weaker economies.
“The problem with rate hikes is it hurts people that need floating rate money... and that’s usually new businesses, women-owned businesses, developing country businesses,” Malpass said.
Separately, the World Economic Forum (WEF) warned that divergent economic recoveries were making it harder to collaborate on global challenges such as climate change.
“Widening disparities within and between countries will not only make it more difficult to control COVID-19 and its variants, but will also risk stalling, if not reversing, joint action against shared threats that the world cannot afford to overlook,” the WEF said in its annual global risks report on Tuesday.