The World Bank cut its forecast for global economic growth this year as a result of the Russian war in Ukraine and is preparing a $170 billion aid package for nations to deal with the confluence of war, pandemic and sky-high inflation.
The Washington-based institution lowered its forecast for global growth in 2022 to 3.2% – a sharp drop from the 4.1% prediction in January, World Bank President David Malpass told reporters on Monday. The decline stems from a cut in the outlook for Europe and Central Asia, which include both Russia and Ukraine.
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By comparison, the global economy expanded by 5.7% in 2021.
Malpass said the war between Russia and Ukraine – the worst conflict that Europe has seen in decades – has exacerbated the financial pressures from the COVID-19 pandemic as well as the rising cost of living, saying there is a need to provide assistance immediately. As a result, the World Bank is prepping a $170 billion spending package intended to offset some of the economic fallout from the war.
“This is a continued, massive crisis response given the continuation of the crisis,” Malpass said, noting that the latest relief plan will exceed the $157 billion approved last year to combat the COVID-19 pandemic.
Under the proposal, $50 billion would be spent over the next three months, with an additional $120 billion allocated in relief over the following year. World Bank members will discuss the spending initiative this week during their annual spring meeting with the International Monetary Fund.
“I’m deeply concerned about developing countries,” Malpass said. “They are facing sudden price increases for energy, fertilizer and food, and the likelihood of interest rate increases. Each one hits them hard.”
The IMF – the World Bank’s sister organization – echoed that sentiment last week, with Managing Director Kristalina Georgieva warning the Ukraine war has weakened the economic outlook for a majority of the world and that sky-high inflation posed a “clear and present danger” to the global economy.
Georgieva told reporters the IMF will also downgrade its growth outlook for 143 economies – representing about 86% of total economic output in the world – in 2022 and 2023 as a result of the war, which has driven food and energy prices higher worldwide.
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She said the conflict has sent “shockwaves” throughout the globe, dealing a massive blow to countries still recovering from the COVID-19 pandemic.
“The root cause of what we face today is the war, and it is the war that must end,” Georgieva said in remarks to the Carnegie Endowment for International Peace in Washington. “In economic terms, growth is down and inflation is up. In human terms, people’s incomes are down and hardship is up.”