A word of caution from the World Bank risks spoiling bullish market sentiment
The World Bank on Tuesday trimmedforecasts for economic growth in the United States, the Eurozone and China and warned that high debt levels, rising income inequality and new strains of coronavirus threaten recovery in developing countries.
Global growth in 2022 is expected to slow "significantly" to 4.1% from 5.5% a year earlier, and to 3.2% in 2023 due to pent-up demand fizzling out and fiscal and monetary policies becoming more austere.
The World Bank cut its forecasts for 2021 and 2022 by 0.2 percentage points from June.
The International Monetary Fund, which is to publish a new report on January 25, is likely to cut its growth forecasts as well.
The World Bank pointed to a significant recovery in economic activity in advanced and emerging economies in 2021 after a slowdown in 2020, but warned that longer inflation, persistent supply chain problems and labor shortages, and new coronavirus variants are likely slow down global growth.
Growth in advanced economies will slow to 3.8% in 2022 from 5% in 2021, and will be 2.3% in 2023, the report said. However, the World Bank expects that production and investment in these countries will still return to pre-pandemic levels by 2023.
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