The World Bank warned Tuesday the spread of omicron and other new coronavirus variants threatens to worsen its projected global economic slowdown, particularly in developing countries, and cause more income inequality.
In its latest semi-annual forecast, the bank cut its forecast for global economic growth by 0.2% from estimates released in June.
The report predicts world economic growth will “decelerate markedly” to 4.1% this year from 5.5% last year. The global economy is also expected to decelerate an additional 3.2% in 2023 as pent up demand for goods and services dissipates and governments wind down large relief programs provided early in the pandemic, the report said.
The bank lowered its growth forecasts for the United States, the Euro area and China and cautioned that high debt levels, rising income inequality and new strains of coronavirus variants threatened recovery in developing countries.
“Various downside risks cloud the outlook, including simultaneous omicron-driven economic disruptions, further supply bottlenecks and a de-anchoring of inflation expectations,” said the report, which warned the risks could cause a further 0.7% deceleration in global growth.
World Bank President David Malpass told reporters the pandemic, now in its third year, is inflicting a “huge toll” on developing countries that could have lasting adverse effects.
“We’re seeing troubling reversals in poverty, nutrition and health.” he said. “I’m very worried about the permanent scar on development.”
The report expects advanced economies to grow 3.8% in 2022, significantly lower than 5% in 2021, before decelerating to 2.3% in 2023.
Economic growth in emerging and developing economies is forecast to decelerate to 4.6% in 2022 from 6.3% in 2021 and slow to 4.4% in 2023.
Unstable and conflict-affected economies are expected to remain 7.5% below their pre-pandemic levels, while small island states, hard-hit by the collapse of tourism, are forecast to stay below their pre-pandemic levels of 8.5%.
Information in this report came from Agence France-Presse and Reuters.