London, (Business News Report) – The global economy will slow down in 2022 due to the high levels of debt and the parameters of Coronavirus pandemic, the World Bank said.
The World Bank said that economic growth in the United States, the euro area and China, is threatened by a recovery due to debt and income inequality.
The bank expected the global economy to slow significantly to 4.1% in 2022 from 5.5% last year, and to continue to decline to 3.2% in 2023.
The World Bank’s forecasts for 2021 and 2022 are 0.2 percentage points lower than its World Economic Outlook report, which was released last June.
The International Monetary Fund is also expected to cut its growth forecast in an update on January 25.
The World Bank’s latest semi-annual forecast indicated a significant recovery in economic activity in advanced and developing economies in 2021 after contractions in 2020.
But it warned that prolonged inflation and persistent problems in supply chains, the workforce, and the coronavirus are likely to dampen growth around the world.
The report expected that growth in advanced economies will decline to 3.8% in 2022 from 5% in 2021 and will continue to decline to 2.3% in 2023. However, it said that production and investment in those economies will return to their pre-pandemic trends by 2023.
The bank cut its 2021 US GDP growth estimate by 1.2 percentage points to 5.6% and forecast sharply lower growth at 3.7% in 2022 and 2.6% in 2023.
Japan’s GDP growth would reach 1.7% in 2021, 1.2 percentage points lower than its forecast in June, and rise to 2.9% in 2022, the report said.
China’s GDP is expected to grow by 8% in 2021, down about 0.5 percentage point from its previous estimates. The growth of the second largest economy in the world is expected to slow to 5.1% in 2022 and 5.2% in 2023.
The World Bank said that growth in emerging and developing economies is expected to fall to 4.6% in 2022 from 6.3% in 2021 and continue to decline to 4.4% in 2023, which means that production in these economies will remain 4% lower than pre-pandemic levels.
The bank noted that rising inflation, which particularly severely affects low-income workers, is at its highest level since 2008 in advanced economies, and the highest since 2011 in emerging and developing economies.