BOOSTS FINANCING TARGET: WB says war to cut global growth

- Advertisement -

WASHINGTON- The World Bank is reducing its global growth forecast for 2022 by nearly a full percentage point, to 3.2 percent from 4.1 percent, due to the impacts from Russia’s invasion of Ukraine, World Bank President David Malpass said on Monday.

Malpass told reporters on a conference call that the World Bank was responding to the added economic stresses from the war by proposing a new, 15-month crisis financing target of $170 billion, with a goal to commit about $50 billion of this financing over the next three months.

Malpass said the biggest component of the bank’s growth forecast reduction was a 4.1 percent contraction in the Europe and Central Asia region — comprising Ukraine, Russia and surrounding countries. Forecasts also are being cut for advanced and many developing economies because of spikes in food and energy prices caused by war-related supply disruptions, Malpass said.

- Advertisement -

The International Monetary Fund is expected to cut its global growth forecast on Tuesday.

“We’re preparing for a continued crisis response, given the multiple crises,” Malpass said.

“Over the next few weeks, I expect to discuss with our board, a new 15-month crisis response envelope of around $170 billion to cover April 2022 through June 2023.”

The plan follows on from a World Bank $160 billion COVID-19 financing program, of which Malpass said $157 billion was committed through June 2021.

Malpass said the financing partly will support countries that have taken in refugees from Ukraine and will also help address problems in countries affected by food shortages.

Malpass said World Bank and IMF member countries this week will be discussing new assistance for Ukraine, and expects specific commitments to be announced by a number of donor countries.

The World Bank earlier cut its growth forecast for East Asia and the Pacific for 2022 to reflect the economic impact of Russia’s invasion of Ukraine, warning the region could lose further momentum if conditions worsen.

The Washington-based lender said it expected 2022 growth in the developing East Asia and Pacific (EAP) region, which includes China, to expand 5.0 percent percent, lower than its 5.4 percent forecast in October.

But growth could slow to 4.0 percent if conditions worsened and government policy responses were weaker, World Bank said.

China’s economy is expected to grow 5.0 percent this year, down from a previous estimate of 5.4 percent, it said, noting its government’s capacity to provide stimulus to offset adverse shocks.

“The region confronts a triad of shocks which threaten to undermine its growth momentum,” said World Bank East Asia and Pacific Chief Economist Aaditya Mattoo.

The war between Russia and Ukraine, which Mattoo said was the “most serious risk” to the region’s growth outlook, is leading to food and fuel price increases, financial volatility and reduced confidence all over the world.

Mattoo said Russia’s invasion of Ukraine was more worrying given that the region was still contending with the effects of the COVID-19 pandemic, a structural slowdown in China and faster inflation that could prompt quicker US monetary tightening.

The war’s impact on economies in East Asia and the Pacific would vary depending on their exposure and resilience, Mattoo said. Excluding China, output in the rest of the region is projected to expand 4.8 percent this year.

“Just as the economies of East Asia and the Pacific were recovering from the pandemic-induced shock, the war in Ukraine is weighing on growth momentum,” World Bank Vice President for East Asia and Pacific Manuela Ferro said in a statement.

“The region’s largely strong fundamentals and sound policies should help it weather these storms.”

Author

- Advertisement -

Share post: