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.



OPEC Lifts 2026 Oil Demand View

FILE PHOTO: A view of the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside their headquarters in Vienna, Austria, November 30, 2023. REUTERS/Leonhard Foeger/File Photo
FILE PHOTO: A view of the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside their headquarters in Vienna, Austria, November 30, 2023. REUTERS/Leonhard Foeger/File Photo
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OPEC Lifts 2026 Oil Demand View

FILE PHOTO: A view of the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside their headquarters in Vienna, Austria, November 30, 2023. REUTERS/Leonhard Foeger/File Photo
FILE PHOTO: A view of the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside their headquarters in Vienna, Austria, November 30, 2023. REUTERS/Leonhard Foeger/File Photo

The Organization of the Petroleum Exporting Countries (OPEC) raised estimates for world demand growth in 2026 by 100,000 barrels a day to 1.4 million a day, a fractionally higher rate than this year, on stronger economic expectations. It trimmed forecasts for supply growth outside the group by the same amount.

A monthly report showed that in July, OPEC+ raised crude output by 335,000 bpd to 41.94 million bpd during the same period.

In return, OPEC has downgraded its forecast for US oil supply growth next year, paving the way for Brazil to become the largest source of non-OPEC+ output expansion in 2026, according to the Monthly Oil Market Report.

US liquids output is now expected to rise by just 130,000 b/d — down by 80,000 b/d from last month's report and sharply lower than the 510,000 b/d projected in January. The revision reflects sustained capital discipline and weaker momentum in drilling activity, the MOMR said.

Brazilian supply is forecast to increase by 160,000 b/d in 2026, making it the top contributor to non-OPEC+ growth.

Total non-OPEC+ supply is now projected to grow by 630,000 b/d next year — 100,000 b/d less than previously expected. OPEC left its 2025 non-OPEC+ supply growth forecast unchanged at 810,000 b/d.

In the report, OPEC also increased its forecast for world economic growth slightly this year to 3.0% as US President Donald Trump's administration signs some trade deals and the economies of India, China and Brazil outperform expectations.

“Economic data at the start of the second half of 2025 further confirm the resilience of global growth, despite persistent uncertainties related to US-centered trade tensions and broader geopolitical risks,” OPEC said.

Brent crude was steady after OPEC published the report, trading close to $66 a barrel.