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World Bank Warns of Global Stagflation Risk

·1 min read
iStockphoto

The global economy is facing a threat of low growth and high inflation that could last for years, the World Bank announced Tuesday. Weighing the effects of rising energy and food prices, as well as the campaign by central banks to raise interest rates, the Washington-based financial institution slashed its global growth estimate for 2022 to 2.9%, down from 4.1% in January.

“Just over two years after COVID-19 caused the deepest global recession since World War II, the world economy is again in danger,” President David Malpass said in the latest Global Economic Prospects report. “This time it is facing high inflation and slow growth at the same time. Even if a global recession is averted, the pain of stagflation could persist for several years — unless major supply increases are set in motion.”

The U.S. economy will do better than most thanks to a strong dollar and healthy financial institutions, the bank said, with an estimated growth rate of 2.5% this year. But many low-income countries will face more difficult conditions, as lower-than-expected growth and rising borrowing costs sharply increase the risk of financial crises.

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