WASHINGTON – Global inequality is likely to increase this year, since small number of large economies the fastest recovery in 80 years while many poorer countries are struggling to return to pre-pandemic income levels, the World Bank said.
The global economy is set to grow 5.6% this year, up from a January forecast of 4.1%, the fastest recovery from five post-WWII recessions, the bank said on Tuesday in its semi-annual global economic outlook report With.
“While there are welcome signs of global recovery, the pandemic continues to inflict poverty and inequality on people in developing countries around the world,” said David Malpass, President of the World Bank Group. The bank offers loans and technical advice to developing and emerging countries.
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While about 90% of advanced economies are expected to regain pre-pandemic per capita income levels by 2022, only about a third of emerging and developing economies are likely to do so, the bank said, in part due to unequal access to Covid-19 vaccines.
The global economy devastated by Covid shrank by an estimated 3.5% in 2020, the bank said. While the recovery is expected to continue next year with growth of 4.3%, production levels will remain 2% below pre-pandemic forecasts.
The US, the world’s largest economy, is forecast to grow 6.8% this year, compared to the bank’s January forecast of 3.5%. Growth of 8.5% is forecast for China, the second largest economy, 8.3% for India and 4.2% for the euro zone.
In contrast, the bank cut is its growth forecast for low-income countries– those with an annual GNI per capita of $ 1,035 or less – to 2.9% this year, up from an earlier forecast of 3.4%. Many of these countries are in sub-Saharan Africa.
High debt levels threaten the prospects for many emerging and developing countries as inflation could lead to higher borrowing costs, the bank said. Covid-19 is also threatened with a resurgence.
“If the risks of record high debt are not addressed, these economies will remain vulnerable to financial market stress should investor risk sentiment deteriorate due to inflationary pressures in the advanced economies,” said Ayhan Kose, director of the World Bank’s Prospects Group.
Global inflation is expected to remain under control for advanced economies and half of emerging and developing countries. However, low-income countries that have higher inflation could particularly hard hit by rising food prices.
Global price levels fell 0.9 percentage points between January and April last year amid a slump in demand and lower oil prices. However, inflation returned quickly and exceeded pre-pandemic levels by April 2021, the World Bank said. The bank predicts that the global inflation rate this year will rise from 2.5% in 2020 to 3.9%.
The International Monetary Fund, a lender for countries in financial distress, said the world economy in April would grow 6% this year, versus its January forecast for 5.5% growth.
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