World Bank’s ‘Global Economic Prospects’ Report

January 12, 2022

World bank’s Global Economic Prospects’ Report was released on January 11, 2022.

Key Findings of the report

The report notes that, Global economic growth will decrease sharply to 4.1% in 2022 and 3.2% in 2023, from 5.5% in 2021.
It projects India’s annual growth to be 8.3% in the fiscal year 2021-2022, 8.7% in 2022-23, while 6.8% in 2023-24.
It also flagged the risks posed by rising inflation and growing inequality.
It noted that, after having recovered in 2021, global economy is headed towards “pronounced slowdown”, because of new Covid-19 variants, increasing inflation, debt & income inequality, reducing fiscal & monetary support and decreasing demand.

Impact of Omicron variant

Rapid spread of the Omicron variant shows that, covid-19 pandemic is likely to disrupt economic activity. Furthermore, deceleration in major economies including United States & China, will weigh on external demand in emerging and developing economies.
Report notes that, at this time when governments across many developing economies lack policy space for supporting activity if needed, new Covid-19 outbreaks, inflationary pressure and supply-chain bottlenecks could increase the risk of a hard landing.

Outlook for South Asia

In the outlook for South Asia, India stands at a relatively bright spot. World Bank’s projection of 8.3% in India in 2021-22 is unchanged from its June 2021 report. However, forecast for 2022-23 and 2023-24 has been changed to 8.7% and 6.8%, respectively. It reflects higher investment from private sector and in infrastructure.

Advance estimates from India’s statistics office

As per advance estimates from statistics office, India’s economy is likely to grow by 9.2% in the financial year 2021-22.

World Bank’s concerns over South Asia

Report of World Bank flags risks specific to South Asia because emergence of Omicron is likely to hinder economic activity with mobility restrictions and lower external demand. Upward price pressures are expected to increase the inflation. The region is vulnerable to several factors including climate change because of.