The World Bank projects that the global growth forecast will taper to 4.1 per cent in 2022.
In it’s January 2022 Global Economic Prospects Report, the World Bank says it is down two tenths of a percent from 5.6 per cent in 2021.
According to the report, developing countries are facing issues ranging from lower vaccination rate, global macro policies and debt burden that would hamper growth and widen the gap with developed economies.
“Developing countries are facing severe long-term problems related to lower vaccination rates, global macro policies and the debt burden. There’s a growing canyon between their growth rates and those in advanced economies.
“This inequality is even more dramatic in per capita and median income terms, with people in the developing world left behind and poverty rates rising. We’re seeing troubling reversals in poverty, nutrition, and health.
“The reversal in education from school closures will have a permanent impact; the share of 10 year-olds who cannot read a basic story has risen from 53% to 70% in low and middle-income countries.
“Many schools remain close, and the data is clear that this causes learning to go down particularly for primary age children. I am very worried about the permanent scar on development.
The GEP report noted that the supply chain will continue to be disrupted. Just as it said that inflation will be elevated.
“The US, for example, is suffering what’s being called the Great Resignation. It’s hard to get workers back into the labor force and the supply chain once they’ve exited. Both inflation and interest rates hit the poor the hardest.
“A third of developing countries have already had a hike in interest rates and the private sectors in developing countries are shrinking. They are key to growth, but they’re under pressure.
“The major central banks are borrowing huge amounts of bank reserves to maintain their bond and mortgage portfolios. They have many, many trillions of dollars of bank debt. For now, when bonds mature, they buy more bonds. This crowds out small businesses and developing countries.
“Another key monetary issue that I’ll raise is whether the central banks use their regulatory policies to allocate capital and credit toward small businesses or away from them, as has been happening. This regulatory power has more impact on small businesses than the reserve requirements, since bank reserves are in massive excess. We’ve gone way beyond monetarism. It’s really post-monetarism, where regulatory policy governs credit flows more than the money supply does,” the report stated.