The World Bank forecasts a drastic slowdown in economic growth by 2022

The World Bank (WB) predicted this Tuesday that the growth of the world economy will register a “pronounced slowdown” in 2022 and 2023 Y will go from 5.5% in 2021 to 4.1% this year and 3.2% in the next.

In its forecasts for the evolution of the world economy in the next two years, published this Tuesday, the WB considered that consumer demand accumulated during the pandemic “will dissipate” in parallel to the fiscal and monetary support to which several economies resorted in 2020 and 2021, which will contribute to the reduction in the growth rate.

“After a strong recovery in 2021, the global economy is entering a pronounced slowdown amid threats such as variants of covid-19 and rising inflation, debt and income inequalities that can jeopardize the recovery in developing economies, “the World Bank said in a statement.

The pandemic remains a risk

The pandemic will continue to be an element that alters economic activity in the nearest future, as indicated by “the rapid expansion of the omicron variant,” according to the agency.

Also, consider that the “notable” slowdown in large economies such as the US and China will have a substantial impact on the demand for goods and services from developing countries, just at a time when these “do not have the space to implement shock policies”.

The bank thus alerted the risk of a ‘hard landing’ fueled by new covid-19 outbreaks, persistent bottleneck problems in the supply chain, inflationary pressures and large financial vulnerabilities in many parts of the world.

“Growing inequality and security risks are particularly damaging for developing countries”, said the president of the group Bando Mundial, David Malpass.

According to Malpass, in order for more countries to be on “a path favorable to growth”, “coordinated international actions and a series of comprehensive national policies” are necessary.

Latin America will grow 2.6%

In the specific case of Latin America, the World Bank predicts that the region will grow 2.6% in 2022 and 2.7% in 2023, after a very strong recovery of 6.7% last year, and it faces significant risks such as a steep rise in the number of covid-19 cases, funding strains and debt-related stress.

Growth will slow in the region as fiscal and monetary policy tightens, the delay in improvements in labor market conditions is prolonged and external conditions become less favorable, the agency pointed out in its semi-annual report.

Government expects 2022 to be a ‘good’ year, of economic reactivation and growth

The recovery process towards the levels of the Gross Domestic Product (GDP) prior to the pandemic will be uneven by country and in some of them it will take longer to arrive, said the World Bank.

The projections imply that, if the figures are weighted by GDP, the region of Latin America and the Caribbean will lose ground in per capita income not only in relation to advanced economiesbut also with those of East Asia and the Pacific and those of Europe and Central Asia.

By country, Brazil’s economy will decelerate to 1.4% in 2022 and will rebound to 2.7% in 2023.

Mexico’s growth, meanwhile, will decline according to projections to 3% in 2022 and 2.2% in 2023.

In Argentina, growth will slow to 2.6% in 2022 and 2.1% the following year, while the strong rebounds seen in Chile, Colombia and Peru in 2021 will also weaken in 2022 and further in 2023.

In the case of Ecuador, a growth of 3.9% was estimated in 2021. The World Bank forecasts that this figure will decline to 3.1% in 2022 and 2.5% in 2023.

In central America, growth will remain strong in 2022 at 4.7%, due to the improvement in the outlook for vaccination against covid-19 and the steady and continuous inflow of remittances.

The World Bank warned that coronavirus outbreaks continue to pose a risk even in countries with high vaccination rates and that a sudden deterioration in investor attitude could lead to difficulties in dealing with debt service and episodes of capital outflows. (I)