Berliner Boersenzeitung - 'Stagflation' risk as Ukraine war chokes global growth: World Bank

EUR -
AED 4.102105
AFN 75.943776
ALL 98.559302
AMD 432.564919
ANG 2.012493
AOA 1053.718626
ARS 1078.246379
AUD 1.615995
AWG 2.013058
AZN 1.903018
BAM 1.956263
BBD 2.254705
BDT 133.431563
BGN 1.95567
BHD 0.420474
BIF 3227.592984
BMD 1.116814
BND 1.432422
BOB 7.716309
BRL 6.068661
BSD 1.116649
BTN 93.443216
BWP 14.597564
BYN 3.654164
BYR 21889.557957
BZD 2.250874
CAD 1.510324
CDF 3199.673034
CHF 0.93949
CLF 0.036393
CLP 1004.183913
CNY 7.830771
CNH 7.796932
COP 4662.174305
CRC 579.581211
CUC 1.116814
CUP 29.595576
CVE 110.844247
CZK 25.143401
DJF 198.480656
DKK 7.45943
DOP 67.511856
DZD 147.632829
EGP 53.951777
ERN 16.752213
ETB 133.128577
FJD 2.438568
FKP 0.85052
GBP 0.835251
GEL 3.038171
GGP 0.85052
GHS 17.612595
GIP 0.85052
GMD 76.506072
GNF 9640.902719
GTQ 8.637546
GYD 233.589897
HKD 8.679836
HNL 27.775602
HRK 7.593232
HTG 147.162717
HUF 397.072547
IDR 16891.646973
ILS 4.169519
IMP 0.85052
INR 93.498064
IQD 1463.026578
IRR 47023.461504
ISK 150.960204
JEP 0.85052
JMD 175.431498
JOD 0.791491
JPY 158.829409
KES 144.069421
KGS 94.039997
KHR 4539.850039
KMF 493.213107
KPW 1005.13213
KRW 1463.356082
KWD 0.34064
KYD 0.930595
KZT 535.615475
LAK 24662.053383
LBP 100066.551049
LKR 333.41887
LRD 216.410712
LSL 19.192495
LTL 3.297662
LVL 0.67555
LYD 5.294124
MAD 10.82556
MDL 19.447167
MGA 5082.621727
MKD 61.575479
MMK 3627.368897
MNT 3794.934539
MOP 8.941976
MRU 44.354319
MUR 51.318034
MVR 17.154688
MWK 1938.789804
MXN 21.993751
MYR 4.606902
MZN 71.336549
NAD 19.192495
NGN 1863.393714
NIO 41.102919
NOK 11.725475
NPR 149.506067
NZD 1.76137
OMR 0.429471
PAB 1.116634
PEN 4.187052
PGK 4.437666
PHP 62.551688
PKR 310.143432
PLN 4.278011
PYG 8716.061777
QAR 4.066042
RON 4.979097
RSD 117.161668
RUB 105.231058
RWF 1487.59649
SAR 4.189354
SBD 9.261119
SCR 14.79953
SDG 671.767835
SEK 11.271168
SGD 1.429415
SHP 0.85052
SLE 25.516192
SLL 23419.029236
SOS 637.701275
SRD 34.286758
STD 23115.798718
SVC 9.770311
SYP 2806.029064
SZL 19.192494
THB 36.151687
TJS 11.881355
TMT 3.90885
TND 3.394561
TOP 2.615695
TRY 38.161322
TTD 7.585372
TWD 35.28057
TZS 3048.90309
UAH 45.967974
UGX 4125.289807
USD 1.116814
UYU 46.821075
UZS 14225.424679
VEF 4045718.043587
VES 41.120607
VND 27484.797006
VUV 132.590423
WST 3.124246
XAF 656.162155
XAG 0.035308
XAU 0.000421
XCD 3.018247
XDR 0.826043
XOF 657.249161
XPF 119.331742
YER 279.566552
ZAR 19.114316
ZMK 10052.671816
ZMW 29.530836
ZWL 359.613711
  • RBGPF

    2.5000

    63.3

    +3.95%

  • RELX

    -0.5300

    47.56

    -1.11%

  • SCS

    0.0400

    13.25

    +0.3%

  • RIO

    0.4800

    71.23

    +0.67%

  • RYCEF

    -0.0600

    7.04

    -0.85%

  • BCE

    0.3600

    35.19

    +1.02%

  • VOD

    0.0500

    10.09

    +0.5%

  • CMSD

    -0.0300

    25.08

    -0.12%

  • NGG

    -0.3300

    69.73

    -0.47%

  • BCC

    1.1800

    141.49

    +0.83%

  • CMSC

    0.0300

    25.14

    +0.12%

  • GSK

    -0.1900

    40.71

    -0.47%

  • JRI

    0.1200

    13.58

    +0.88%

  • AZN

    -0.5600

    77.62

    -0.72%

  • BTI

    -0.2369

    36.84

    -0.64%

  • BP

    0.6300

    31.42

    +2.01%

'Stagflation' risk as Ukraine war chokes global growth: World Bank
'Stagflation' risk as Ukraine war chokes global growth: World Bank / Photo: Stefani Reynolds - AFP/File

'Stagflation' risk as Ukraine war chokes global growth: World Bank

The global economy risks falling into a harmful period of 1970s-style "stagflation," sparked chiefly by Russia's invasion of Ukraine, the World Bank warned Tuesday as it slashed its annual growth forecast.

Text size:

The toxic combination of weak growth and rising prices could trigger widespread suffering in dozens of poorer countries still struggling to recover from the upheaval of the Covid-19 pandemic.

The stark forecast came as the international development lender cut its global growth estimate to 2.9 percent, 1.2 percentage points below the January forecast, due to the severe downturn caused by the war.

"The risk from stagflation is considerable with potentially destabilizing consequences for low and middle income economies," World Bank President David Malpass told reporters.

"For many countries recession will be hard to avoid."

And if risks to the outlook materialize, global growth could slow even more sharply -- triggering a worldwide recession, Malpass warned.

The bank's Global Economic Prospects report said the Ukraine war is compounding the damage from the pandemic and magnifying the slowdown in the global economy, "which is entering what could become a protracted period of feeble growth and elevated inflation."

The slump comes after growth recovered to 5.7 percent in 2021 following the pandemic downturn -- marking the "sharpest deceleration following an initial recovery from global recession in more than 80 years."

The report notes similarities to the 1970s when growth stalled and inflation skyrocketed with supply factors fueling price hikes and following a long period of low interest rates.

But in contrast to that period, the US dollar is strong, and major financial institutions are in solid position.

- Global recession risk -

The Russian invasion and Western sanctions on Moscow have sent grain and oil prices soaring, threatening to worsen hunger in poor countries and causing drivers around the world to face eye-popping prices at the pump.

The World Bank chief stressed the need to increase production to combat rising prices, especially for energy, as short supplies of natural gas and fertilizer are harming food production.

Malpass also said it was "crucial" to avoid export restrictions and subsidies that "magnify the rise in prices and distort markets."

Likewise, the bank warned against trying to resolve the inflation spike with price controls or export restrictions which would only worsen the damage.

Given the widespread uncertainty, the situation could deteriorate further due to a series of "interlinked" risks, including the possibility of further geopolitical tensions, steep interest rates hikes to contain inflation and rising wages, and the potential for Covid-19 to reassert itself, according to the forecast.

The US Federal Reserve has embarked on an aggressive drive to raise borrowing rates to cool demand and combat rising prices, and the World Bank notes that higher rates have played a prominent role in previous financial crises in emerging market and developing economies (EMDEs), straining resources and causing outflows of cash from those countries.

The simultaneous materialization of these risks could result in a much sharper and more prolonged global slowdown.

If faster US rate hikes were to cause "acute financial stress" in EMDEs, the European Union were to face a sudden ban on energy imports, and China were to experience renewed pandemic-related lockdowns, "global growth could fall more sharply in 2022 and nearly halve in 2023 -- declining to 2.1 percent and 1.5 percent, respectively," the report said.

Malpass said that would cause per capita income growth to fall to zero, and "that certainly would qualify as a global recession."

Even without that dire outcome, per capita income in developing economies this year will be nearly five percent below its pre-pandemic trend.

The report cut the US growth estimate by 1.2 points to 2.5 percent, and the forecast for China was lowered 0.8 point to an unusually low 4.3 percent.

Meanwhile the euro area forecast was cut to 2.5 percent, and Japan to 1.7 percent.

Russia's economy is expected to contract this year by 11.3 percent.

(A.Berg--BBZ)