World Bank Projects Slow Growth, Warns of ‘Stagflation’ Risk

World Bank President David Malpass said that the danger of stagflation is considerable today. (Reuters)
World Bank President David Malpass said that the danger of stagflation is considerable today. (Reuters)
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World Bank Projects Slow Growth, Warns of ‘Stagflation’ Risk

World Bank President David Malpass said that the danger of stagflation is considerable today. (Reuters)
World Bank President David Malpass said that the danger of stagflation is considerable today. (Reuters)

The World Bank on Tuesday slashed its global growth forecast by nearly a third to 2.9% for 2022, warning that Russia's invasion of Ukraine has compounded the damage from the COVID-19 pandemic, and many countries now faced recession.

The bank forecast a slump in global growth to 2.9% in 2022 from 5.7% in 2021, a drop of 1.2 percentage points from its January forecast, and said growth was likely to hover near that level in 2023 and 2024.

The war in Ukraine had magnified the slowdown in the global economy, which was now entering what could become “a protracted period of feeble growth and elevated inflation,” the Bank said in its Global Economic Prospects report, warning that the outlook could still grow worse.

This raises the risk of stagflation, with potentially harmful consequences for middle- and low-income economies alike.

In a news conference, World Bank President David Malpass said global growth was being hammered by the war, fresh COVID lockdowns in China, supply-chain disruptions and the rising risk of stagflation -- a period of weak growth and high inflation last seen in the 1970s.

“The danger of stagflation is considerable today,” Malpass wrote in the foreword to the report.

“Subdued growth will likely persist throughout the decade because of weak investment in most of the world,” he added.

“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.”

Between 2021 and 2024, the pace of global growth is projected to slow by 2.7 percentage points, Malpass said, more than twice the deceleration seen between 1976 and 1979.

The report warned that interest rate increases required to control inflation at the end of the 1970s were so steep that they touched off a global recession in 1982, and a string of financial crises in emerging market and developing economies.

It said global inflation should moderate next year but would likely remain above targets in many economies.

Growth in advanced economies was projected to decelerate sharply to 2.6% in 2022 and 2.2% in 2023 after hitting 5.1% in 2021.

Emerging market and developing economies were seen achieving growth of just 3.4% in 2022, down from 6.6% in 2021, and well below the annual average of 4.8% seen in 2011-2019.



Gold Rises as Investors Seek Safety amid Uncertainty on Trump Tariffs

A jeweller shows a gold bar at his shop in downtown Kuwait City on May 20, 2024. (Photo by YASSER AL-ZAYYAT / AFP)
A jeweller shows a gold bar at his shop in downtown Kuwait City on May 20, 2024. (Photo by YASSER AL-ZAYYAT / AFP)
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Gold Rises as Investors Seek Safety amid Uncertainty on Trump Tariffs

A jeweller shows a gold bar at his shop in downtown Kuwait City on May 20, 2024. (Photo by YASSER AL-ZAYYAT / AFP)
A jeweller shows a gold bar at his shop in downtown Kuwait City on May 20, 2024. (Photo by YASSER AL-ZAYYAT / AFP)

Gold prices rose on Tuesday as investors continued to flock to the safe-haven asset amid uncertainty surrounding US President Donald Trump's tariff plans, which could escalate an ongoing trade war and slow global economic growth.

Spot gold was up 0.3% at $3,219.99 an ounce at 1135 GMT. Bullion hit a record high of $3,245.42 on Monday.

US gold futures rose 0.3% to $3,235.50.

"The environment remains supportive for higher gold prices, but the journey towards higher prices will not be a straight line, there will likely be some temporary setbacks," said UBS analyst Giovanni Staunovo.

According to Reuters, federal Register filings on Monday showed that the US administration is advancing investigations into pharmaceutical and semiconductor imports in a bid to impose tariffs.

Trump on Sunday said he would announce the tariff rate on imported semiconductors over the next week.

Bullion, a hedge against global instability, has maintained its upward trajectory from last year, rising over 23% so far in 2025 and clinching multiple record highs.

The US economy is in a "big pause" due to uncertainties surrounding the tariffs and other policies, Atlanta Federal Reserve Bank President, Raphael Bostic said on Monday, suggesting the central bank should retain its current wait-and-see approach until there is more clarity.

Traders are currently expecting 83 basis points of rate cuts from the Fed this year. Non-yielding bullion tends to thrive in a low interest rate environment.

Meanwhile, investments in Chinese physically-backed gold exchange-traded funds so far this month have exceeded those for all of the first quarter and overtaken inflows registered by US-listed funds, World Gold Council data showed.

"Higher inflation, lower economic growth and political uncertainty are likely to keep supporting gold demand from investors and central banks. New gold import quotas in China should also be supportive," Staunovo said.

Spot silver fell 0.2% to $32.27 an ounce and platinum rose 0.9% to $960.20, while palladium was up 0.6% at $961.68.