January 12, 2022: Global Economic Prospects Report Coverage

The launch of this year’s World Bank Group Global Economic Prospects report is a significant one.?In addition to updating the Bank’s economic forecasts, it identifies several major challenges facing developing countries, including inflation, the Covid uncertainties, and debt.

Press coverage has been unusually broad, and I wanted to share with you some of the articles to provide context for our work:

The Associated Press: Outbreaks, bottlenecks expected to slow global growth in ‘22

• “The world economy is simultaneously facing COVID-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory,” World Bank President David Malpass said.

Axios: World Bank: Gap between rich and poor countries is widening

• Emerging economies face a paradox. Their citizens suffer from high inflation but they also stand to suffer from efforts by central banks to contain inflation by raising interest rates, which constrains credit worldwide. When the Fed raises interest rates to fight inflation, it tends to slow the economies of Asia, Latin America and beyond, where borrowing takes place in dollars.

BBC News: World Bank warns global economy faces grim outlook

• While officials in many countries, including the US, are now expected to raise interest rates to try to rein in price increases, Mr Malpass warned higher borrowing costs could hurt economic activity - especially in weaker economies. "The problem with rate hikes is it hurts people that need floating rate money… and that's usually new businesses, women-owned businesses, developing country businesses," Mr Malpass said.

Deutsche Welle: World Bank: Global economy losing steam as COVID persists

• The bank also sees danger in unprecedented government spending, mainly on economic stimulus. Governments have indeed taken on huge amounts of debt. In 2020, global debt came in at 263% of gross world product, the highest level in 50 years. But here again, emerging market and developing economies are at a disadvantage. Many are in debt distress; some have already defaulted. This is bound to lead to unfavorable credit conditions or no more lines of credit at all. These countries may also face higher interest rates, increased inflation and unfavorable exchange rates.

The Guardian: Developing countries at risk from global economic threats, says World Bank

• Malpass said many countries were already facing an education “hard landing”, pointing out that in poor countries the number of 10-year-olds unable to read a simple text had risen from 53% to 70% in the past two years. “Deep debt relief is needed,” Malpass added. “If we wait too long it will be too late and it won’t be successful.”

The New York Times: The World Bank warns that the pandemic will slow economic growth in 2022.

• The World Bank is recommending stronger debt relief initiatives to help poor countries as well as urging support for policies that will strengthen their financial systems and improve local infrastructure in ways that will spur growth. Easing global supply chain bottlenecks, particularly for Covid vaccine doses, will be crucial. “At the start of 2022 the supply of vaccines is increasing appreciably, but new variants and vaccine deployment bottlenecks remain major obstacles,” Mr. Malpass said.

Reuters: World Bank demands faster G20 debt relief as poor nations squeezed

• “Deep debt relief is much needed for the poorer countries. If we wait too long, it will be too late,” Malpass said, calling for an end to non-disclosure agreements often demanded by China and other creditors, as well as clear rules for assessing and enforcing comparable treatment among all creditors. Malpass said adding an aggregated collective action clause to all new official and private sector debt instruments could help rebalance the power between debtor and creditor countries. He said quicker work was needed on debt restructurings, noting that Chad, the first country that requested treatment under the framework one year ago, was still waiting to complete the process.

The Wall Street Journal: Omicron, Supply-Chain Troubles to Slow Growth, World Bank Says

• The Washington-based World Bank, the world’s largest development bank which is focused on eliminating global poverty, also said the global economy remains at risk to new variants of the virus because vaccine coverage is far lower in emerging-market and low-income countries than in advanced economies. Even so, the slowdown is likely to affect most major economies. U.S. growth is expected to slow to 3.7% from 5.6%, according to the forecast, which projects China to slow to 5.1% from 8%.

The Washington Post: As pandemic rages on, the global economy is its latest victim

• “The core issue that’s going on in the world is inequality, poor people being hit the hardest by covid, but also by interest rate hikes, by inflation, by macro policies and vaccine inequality,” World Bank President David Malpass said Monday in an interview with The Washington Post. He added, “it’s especially harsh on people in poorer countries. And we’re seeing reversals in development that will leave scars for decades. That includes education, health, food insecurity and so on. Inflation is [also] a big problem. It’s hard to stop.”

I would also invite you to read my foreword to the GEP report, in which I provide further thoughts on how we can work to boost shared prosperity and put more countries onto a favorable growth path.

-David