World Bank chief’s warning of global recession
- May 27, 2022
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The World Bank chief has warned that Russia’s invasion of Ukraine could trigger a global recession as prices for food, energy and fertilizer soar.
David Malpass said it is difficult “to see how we can avoid a recession” during a business event in the United States on Wednesday (27/5).
He added that a series of lockdowns in response to the coronavirus in China is raising concerns about an economic slowdown.
His comments are the latest warning about the growing risk that the world economy could contract.
“As we look at global GDP (Gross Domestic Product, or the sum of all goods and services)… it is difficult now to see how we avoided a recession,” Malpass said at a conference hosted by the US Chamber of Commerce, without giving a specific forecast. .
“The idea of energy prices doubling is enough to trigger a recession all by itself,” he added.
Last month, the World Bank cut its forecast for global economic growth for this year by nearly a percentage point to 3.2%.
GDP is one of the most important ways of measuring how well, or poorly, an economy is doing and is closely watched by economists and central banks. It helps companies decide when to expand and recruit more workers or invest less and cut their workforce.
Governments also use this indicator to guide decisions on everything from taxes to spending. It is a key indicator, along with inflation, for central banks when considering whether or not to raise or lower interest rates.
According to Malpass, many European countries are still heavily dependent on Russia for oil and gas — even as European countries move forward with plans to reduce their dependence on Russian energy.
He said Russia’s measures to cut off gas supplies could cause a “substantial slowdown” in the region.
Malpass pointed out that higher energy prices are already weighing on Germany, Europe’s largest economy and the world’s fourth largest.
Developing countries are also being affected by shortages of fertilizers, food and energy, he said.
Malpass also raised concerns about lockdowns in some of China’s major cities — including the financial, manufacturing and transportation hub of Shanghai — which, he said, “are still having ramifications or slowdown impacts on the world.”
“China was already experiencing some real estate contraction, so China’s growth forecast before Russia’s invasion had already softened substantially for 2022,” he said. “Then the waves of covid caused lockdowns that further reduced growth expectations for China.”
Also on Wednesday (25/5), the Prime Minister of China, Li Keqiang, said that the world’s second-largest economy has been hit harder by the latest round of lockdowns than at the beginning of the pandemic in 2020.
He called for more action from authorities to restart factories after the lockdowns.
“Progress is not satisfactory,” Li said. “Some provinces are reporting that only 30% of businesses have reopened… the proportion should be increased to 80% in a short period of time.”
Full or partial lockdowns were imposed in dozens of Chinese cities in March and April, including a lengthy lockdown of Shanghai.
The measures led to a sharp slowdown in economic activity across the country.
In recent weeks, official figures have shown that much of the Chinese economy has been impacted, from manufacturers to retailers.
Source: BBC News Brazil