Countries around the world are facing recession as the Ukraine war hits economies already rocked by the Covi-19 pandemic, the World Bank has warned.
Less developed countries in Europe and East Asia face a “major recession”, it said. The risk of high inflation and low growth – so-called “stagflation” – is also higher, World Bank President David Malpass said. Energy and food bills have been rising around the world.
“The war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” Malpass said.
He also warned in the World Bank’s Global Economic Prospects report for June that the danger of stagflation was “considerable”.
“Subdued growth will likely persist throughout the decade because of weak investment in most of the world. With inflation now running at multi-decade highs in many countries and supply expected to grow slowly, there is a risk that inflation will remain higher for longer.”
Also, on Tuesday (7), the World Bank approved $ 1.49 billion of additional funding for Ukraine, which it said “will be used to pay for wages for government and social workers”.
The new financing is part of a more-than-$ 4 billion support package for the country, which covers areas including healthcare, education, and sanitation.
More than 100 days have passed since Russia’s invasion of Ukraine, but only now is the sobering size of the shockwaves hitting nations and households thousands of miles away from that epicentre becoming clear.
Developing nations were already struggling to get back on their feet. For every $ 20 households there typically earned pre-pandemic, they now only get $19, but soaring food and energy costs threaten to throw livelihoods further into reverse, spelling misery and hardship for the most vulnerable – and that’s not just true for poorer countries. One survey shows one in six British households have turned to a food bank. That global struggle could be compounded by the higher interest rates being used to ease inflation, just as government support to ease the impact of the pandemic is evaporating.
The World Bank is urging immediate action, from debt relief, to urging nations not to put restrictions on food exports.
Instead they want policymakers to show they are acting together to safeguard food and energy supplies, reassure volatile markets, and ease price spikes. Policymakers have already had to tackle an extraordinary battle.