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Global Economic Prospects

Stagflation Risk Rises Amid Sharp Slowdown in Growth

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Foreword

In his Foreword, WBG President David Malpass reflects on the danger the global economy is in again, just over two years after COVID-19 caused the deepest global recession since World War II. This time, he says, the global economy is "facing high inflation and slow growth at the same time. Even if a global recession is averted, the pain of stagflation could persist for several years—unless major supply increases are set in motion.”

Global and Regional Outlooks

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Global

Spillovers from Russia’s invasion of Ukraine are hastening the deceleration of global economic activity, which is now expected to slow to 2.9 percent in 2022. The war is leading to high commodity prices, adding to supply disruptions, increasing food insecurity and poverty, exacerbating inflation, contributing to tighter financial conditions, magnifying financial vulnerability, and heightening policy uncertainty. The outlook is subject to various downside risks, including intensifying geopolitical tensions, growing stagflationary headwinds, ris... See More

Global and Regional Outlooks

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East Asia and Pacific

Growth in the East Asia and Pacific (EAP) region is projected to decelerate to 4.4 percent in 2022 as slower growth in China more than offsets a rebound in the rest of the region. The region has so far been affected less than the rest of the world by the spillovers from the Russian Federation’s invasion of Ukraine, in terms of both output and inflation; however, the war’s effects on commodity prices and global demand are expected to dampen the recovery, especially in commodity-importing economies. Downside risks to the outlook include a linger... See More

Global and Regional Outlooks

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Europe and Central Asia

The Russian Federation’s invasion of Ukraine has triggered a humanitarian crisis in Ukraine, set back economic growth in Europe and Central Asia (ECA) and beyond, and heightened global geopolitical instability. The invasion has devastated Ukraine’s economy, while output in Russia plummeted. Output in ECA is forecast to shrink by around 3 percent in 2022, as the invasion and its repercussions reverberate through commodity and financial markets, trade and migration links, and business and consumer confidence. The largest regional spillovers of th... See More

Global and Regional Outlooks

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Latin America and the Caribbean

Growth in Latin America and the Caribbean (LAC) is forecast to slow sharply in 2022 and remain weak in the following two years. Elevated inflation, tighter financial conditions, and policy uncertainty are expected to take a toll domestically, while slowing growth in key export markets, U.S. monetary tightening and global supply bottlenecks impart negative spillovers to the region. The largest economies in LAC will be some of the slowest growing this year, dragging region-wide growth down to 2.5 percent. Growth is set to slow further in 2023 to ... See More

Global and Regional Outlooks

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Middle East and North Africa

Output in the Middle East and North Africa region is expected to expand by 5.3 percent in 2022—0.9 percentage point above previous projections, in part reflecting higher oil prices. This would be the region’s fastest growth in a decade; however, this rebound is expected to be short-lived. The region faces a growing divide between oil exporters—which on net should benefit from elevated oil prices and high COVID-19 vaccination rates—and oil importers, which face higher food and energy prices, deteriorating external balances, and still limited vac... See More

Global and Regional Outlooks

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South Asia

South Asia has endured significant adverse spillovers from the Russian Federation’s invasion of Ukraine. Growth is expected to slow from 7.6 percent in 2021 to 6.8 percent in 2022—0.8 percentage points below previous projections. The external environment has worsened markedly, with soaring energy and agricultural prices, slowing global growth, and rising financing costs. While domestic conditions remain solid in many economies, Afghanistan is facing a humanitarian crisis and Sri Lanka is facing dual balance of payments and sovereign debt crises... See More

Global and Regional Outlooks

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Sub-Saharan Africa

Growth in Sub-Saharan Africa (SSA) is projected to slow to 3.7 percent this year reflecting forecast downgrades in over 60 percent of regional economies. Price pressures, partly induced by the Russian Federation’s invasion of Ukraine, are sharply reducing food affordability and real incomes across the region. At just above 1 percent, per capita income growth in SSA is projected to remain much lower than in other EMDEs. More people in SSA are expected to fall into extreme poverty, especially in countries reliant on imports of foods and fuel. Fis... See More

Two Topical Issues

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Global Stagflation

Global inflation has risen sharply from its lows in mid-2020, on rebounding global demand, supply bottlenecks, and soaring food and energy prices, especially since the Russian Federation’s invasion of Ukraine. Markets expect inflation to peak in mid-2022 and then decline, but to remain elevated even after these shocks subside and monetary policies are tightened further. Global growth has been moving in the opposite direction: it has declined sharply since the beginning of the year and, for the remainder of this decade, is expected to remain bel... See More

Two Topical Issues

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Russia’s Invasion of Ukraine: Implications for Energy Markets and Activity

The Russian Federation’s invasion of Ukraine has disrupted global energy markets and damaged the global economy. Compared to the 1970s, the shock has led to a surge in prices across a broader set of energy-related commodities. In energy-importing economies, higher prices will reduce real disposable incomes, raise production costs, tighten financial conditions, and constrain policy space. Some energy exporters may benefit from improved terms of trade and higher commodities production. However, on net, model-based estimates suggest that the war-d... See More

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