The global economy may be headed for years of weak growth and rising prices, a toxic combination that will test the stability of dozens of countries still struggling to rebound from the pandemic, the World Bank warned.
Not since the 1970s — when twin oil shocks sapped growth and lifted prices, giving rise to the malady known as “stagflation” — has the global economy faced such a challenge.
Policymakers must act quickly to mitigate the Ukraine war’s consequences, help countries pay for food and fuel, and accelerate promised debt relief, while avoiding “distortionary policies” such as price controls and export bans, the bank said.The global stagflation threat could have particularly dire effects in the developing world, where per-person income this year remains nearly 5 percent below pre-pandemic levels, the bank said.
But the world’s top economies will not escape damage. Bank economists now expect the United States to grow this year by just 2.5 percent, down from the 3.7 percent rate they projected in January.