World Bank warns of stagflation and higher inflation risk

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Gray Frame Corner

War in Ukraine, lockdowns in China, supply-chain disruptions, and the risk of stagflation are hammering growth.

Inflation is inevitable for many countries.  The global growth is expected to be significantly lower than 4.1%.

It has increased the risk of stagflation, with potentially harmful consequences for middle and low-income economies.

The pace of global growth is expected to slow by 2.7% points between 2021 and 2024, more than twice the slowdown seen between 1976 and 1979.

The report also said that global inflation is expected to moderate next year, but is likely to remain above inflation targets in many economies.

In India, growth is expected to slow to 7.5 percent in fiscal 2022/23, with headwinds from rising inflation, supply chain disruptions, geopolitical tensions and pandemic.

Growth in US is likely to fall by 2.5% in 2022, from 5.7% in 2021. Growth in advanced economies is expected to slow to 2.6% in 2022 and 2.2% in 2023 after reaching 5.1% in 2021.

The current economic and monetary environment resembles the 1970s.

Also, policymakers should avoid disruptive policies such as price controls, subsidies, and export restrictions that could exacerbate the recent rise in commodity prices.

Against the challenging of higher inflation, weak growth, tighter fiscal conditions and limited fiscal policy, governments must re-prioritize spending on targeted relief to vulnerable populations.

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