'Reminiscent of the 1970s': World Bank warns of stagflation, recession

Many gas stations ran out of fuel during the oil crisis in the early 1970s. (Wikimedia Commons)
Many gas stations ran out of fuel during the oil crisis in the early 1970s. (Wikimedia Commons)

Warning of “an extended period of stagflation reminiscent of the 1970s,” the World Bank forecast in its latest report that global economic growth will decrease this year, and most countries should prepare for a recession and several years of above-average inflation.

The World Bank had predicted in January that global growth would be 4.1% this year, but that forecast has been downgraded to 2.9% in the report released Tuesday.

And there won’t be a rebound next year, the report said, with growth limited to 3%.

The World Bank said the “global outlook faces significant downside risks, including intensifying geopolitical tensions, an extended period of stagflation reminiscent of the 1970s, widespread financial stress caused by rising borrowing costs, and worsening food insecurity.”

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After a global growth rate of 5.7% last year, the report forecasts a 2.9% level extending through 2024. The World Bank also expects per capita income in developing economies in 2022 to be nearly 5% below the level prior to the COVID-19 pandemic.

World Bank President David Malpass said the “war in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth.”

For many countries, recession will be hard to avoid,” he said.

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Stagflation, a term used to describe the economy of the 1970s, occurs when inflation is coupled with slow economic growth or recession and high unemployment.

Treasury Secretary Janet Yellen told reporters last month before the G-7 finance ministers meeting in Germany that, globally, “higher food and energy prices are having stagflationary effects, mainly depressing output and spending and raising inflation all around the world.”

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