By Andrea Shalal

WASHINGTON, (Reuters) – The World Bank lowered its forecast for global growth by 1.2 percentage point to 2.9% in 2022. It warned that Russia’s invasion has increased the severity of the COVID-19 pandemic and many other countries are likely to experience recession.

In its Global Economic Prospects Report, the World Bank stated that the Russian invasion in Ukraine had intensified the slowdown of the global economy. It was now in what could be a prolonged period of weak growth and high inflation.

David Malpass (World Bank President) stated that the global economy was suffering from the conflict, the new COVID-19 China lockdowns, disruptions in supply chain and the risk for stagflation. A period of high inflation and weak growth last occurred in the 1970s.

Malpass said in the report’s foreword that the danger of stagflation was “considerable today.” Weak investment across most parts of the world will lead to subdued global growth. This is expected to persist for at least the next decade. There is an increased risk of inflation staying higher due to inflation running at high levels for many years in many countries, and slowing growth.

Malpass stated that the global pace of growth will slow between 2021-2024 by about 2.7 percent. This is more than double the rate recorded in 1976-1979.

According to the report, the interest rate hikes required for inflation control at the close of the 1970s were too steep and caused a worldwide recession and financial crisis in developing and emerging markets.

Although there was some overlap in conditions, there were significant differences. These included the strong dollar and lower oil prices. There also were large balance sheets at financial institutions with generally strong balances.

Malpass stated that policymakers need to work together to provide assistance to Ukraine to reduce risks. They should also counter the rise in food and oil prices. Malpass suggested that debt relief be increased, COVID-19 efforts strengthened, and the process of transitioning to a low carbon economy be accelerated.

Global growth is expected to fall to 2.9% from 5.7% in 2021. The growth rate will then stabilize in 2023-2024. The bank forecasted that global inflation would moderate in the coming year, but it will likely stay above target for many countries.

After hitting 5.1% in 2020, the growth in advanced economies is expected to slow to 2.6% and 2.2% respectively in 2022/23.

The growth rate of emerging market and developing countries was only 3.4% for 2022, compared to 6.6% in 2021 and much lower than the 4.8% annual average seen between 2011 and 2019.

The negative spillovers of the conflict in Ukraine will more than outweigh any short-term gains commodity exporters receive from rising energy prices. 2022 growth projections have been lowered in almost 70% of developing and emerging economies, while they are revised up in Ukraine.

Following growth of 6.5% between 2021 and 2023, the region’s Central Asian and European economies were forecast to contract by 2.9%. In 2023, it was projected that they would rebound to 1.5% growth. The economy of Ukraine was forecast to shrink by 45.1%, and that in Russia by 8.9%.

The bank predicted that growth would slow in Latin America, and in the Caribbean. It was only 2.5% this year, and then slow to 1.9% by 2023.

The rising oil price would have a positive impact on the Middle East, North Africa, and North Africa. In 2022, growth was expected to reach 5.3%, then slow down to 3.6% by 2023. South Asia, however, would experience growth of 6.8% and 5.8% respectively this year and 2023.

The bank stated that Sub-Saharan Africa’s rate of growth will slow to 3.7% per year in 2022, from 4.2% per annum in 2021.