World Bank Warns of Stagflation Risk, Cuts Global Growth Forecast
Toll from Ukraine war and Covid-19 pandemic is likely to lead to years of slow growth and high inflation, bank says.
Toll from Ukraine war and Covid-19 pandemic is likely to lead to years of slow growth and high inflation, bank says.
WASHINGTON—The World Bank sharply lowered its growth forecast for the global economy for this year, warning of several years of high inflation and tepid growth reminiscent of the stagflation of the 1970s.
Citing the damage from the war in Ukraine and the Covid-19 pandemic, the bank said global growth is expected to slump to 2.9% in 2022 from 5.7% in 2021, significantly lower than its January forecast for 4.1% growth. Furthermore, growth is expected to hover around the reduced pace over 2023 and 2024 as the war disrupts human activity, investment and trade while governments withdraw fiscal and monetary support.
“Several years of above-average inflation and below-average growth now seem likely,” David Malpass, president of World Bank Group, told reporters. “The risk from stagflation is considerable.”
Mr. Malpass said recession will be hard to avoid for many countries as growth is hammered by the war in Ukraine, pandemic lockdowns in China and supply-chain disruptions. He urged policy makers to encourage production and avoid trade restrictions. Changes in fiscal, monetary, climate and debt policy are needed to counter capital misallocation and inequality, he said.
In its latest Global Economic Prospects report, the World Bank conducted a detailed assessment of how current global economic conditions compare with the high inflation and weak growth—so-called stagflation—of the 1970s, when oil shocks, high federal spending and loose monetary policy caused inflation to soar.
The bank said that recovery from the stagflation of the 1970s required steep increases in interest rates in major advanced economies, which in turn triggered a string of financial crises in emerging markets and developing economies.
Economists and policy makers are increasingly concerned about the risk of stagflation in the global economy, which could damage living standards for people around the world, particularly in lower and middle-income nations.
As a result of the damage from the pandemic and the war, the World Bank said the level of per capita income in developing economies this year will be nearly 5% below its prepandemic trend.
“Higher food and energy prices are having stagflationary effects, namely, depressing output and spending and raising inflation all around the world,” Treasury Secretary Janet Yellen said in May, noting that the economic outlook globally is challenging and uncertain.
Ms. Yellen appeared before lawmakers on Tuesday as she and the Biden administration face scrutiny over how they have addressed high inflation.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: June 7 2022.
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CommSec research reveals this state is leading the country in economic growth, unemployment, construction and dwelling starts
South Australia is currently the strongest state or territory economy in the country, with economic activity 9.1 percent above its decade-average in the December quarter, according to CommSec research. NSW was second with economic output running 8.6 percent above its long-run average, followed by Victoria with 8.5 percent, the ACT at 8.3 percent and Western Australia at 6 percent.
Economic activity in both Queensland and Tasmania was 4.5 percent above average while the Northern Territory underperformed its long-term average by 0.5 percent.
The CommSec research ranks states and territories on several key economic metrics and compares the latest quarterly data with each area’s decade average. South Australia ranks first on four of the eight key indicators. They are economic growth, unemployment, construction and dwelling starts.
Western Australia ranks first on population growth and business and equipment investment. Population growth has been a key element in Perth and regional Western Australia becomingthe country’s hottest property markets over the past 12 months. CoreLogic figures released this week show home values are up 21.1 percent in Perth and 13.3 percent in the state’s regions.
Despite high inflation, retail spending remained above the long-term average in all states and territories in the December quarter. The ACT led with retail expenditure 12.2 percent higher than its long-term average, followed by Western Australia with 11.3 percent, Victoria at 11.2percent and Queensland at 11.1 percent.
Queensland is in the top spot for new home loans. Propelling this is very strong internal migration and a doubling of the First Home Owners Grant to $30,000 from 20 November last year. New home loans issued to first home buyers in November surged to a 15-month high, according to data from the Australian Bureau of Statistics. Queensland is currently the second strongest housing market, with home values up 16.1 percent in Brisbane and 11.2 percent in regional areas over the past year.
In all states and territories except the Northern Territory, housing finance commitments remained above decade averages in the December quarter. The value of home loans in Queensland was 21.1 percent higher than the state’s long-term average. The next strongest was Western Australia, up 17.5 percent, South Australia, up 14.2 percent, and the ACT, up 12 percent. The new CoreLogic data reveals 15 consecutive months of growth in the national median price, despite high interest rates.
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Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.