World Bank President David Malpass on Wednesday suggested that Russia’s war in Ukraine and its impact on food and energy prices, as well as the availability of fertilizer, could trigger a global recession.
Malpass told an event hosted by the U.S. Chamber of Commerce that Germany’s economy, the world’s fourth largest, has already slowed substantially due to higher energy prices, and said reduced production of fertilizer could worsen conditions elsewhere
“As we look at the global GDP … it’s hard right now to see how we avoid a recession,” Malpass said. He gave no specific forecast.
He said the economies of Ukraine and Russia were both expected to see a significant contraction, while Europe, China and the United States were seeing slower growth.
He also said that a series of coronavirus lockdowns in China is adding to concerns about a slowdown.
His comments are the latest warning over the rising risk that the world economy may be set to contract.
“As we look at the global GDP… it’s hard right now to see how we avoid a recession,” Mr Malpass said, without giving a specific forecast.
“The idea of energy prices doubling is enough to trigger a recession by itself,” he added.
Last month, the World Bank cut its global economic growth forecast for this year by almost a full percentage point, to 3.2%.
According to the World Bank president, the economies of Ukraine and Russia are likely to contract significantly, while Europe, China, and the United States are expected to grow more slowly. He claimed that developing countries were being struck even harder due to a lack of fertiliser, food stores, and energy sources.
“The idea of energy prices doubling is enough to trigger a recession by itself,” the World Bank president said.
According to the World Bank president, China’s unusually rapid slowdown in growth was caused by the COVID-19 outbreak, inflation, and the country’s pre-existing real estate issue. Malpass, on the other hand, gave no indication of when a global recession would start.
Malpass noted that developing countries were most likely to be plunged into recession by soaring food, energy, and fertilizer prices.
“It’s a very difficult, challenging outlook for advanced economies, but even worse for developing countries,” he said.
Gas prices have soared so high in the US that demand for gasoline is dropping just as the summer driving season is about to begin. Earlier in the year, President Joe Biden warned that Americans will likely feel “Putin’s price hike” at the gas pump for the foreseeable future.
“Countries are under severe financial stress,” Malpass said at the time. “Sixty percent of low-income countries are already in debt distress or at high risk of it.”
The World Bank last month had already cut its global growth forecast for 2022 by nearly a full percentage point, to 3.2% from 4.1%, due to the impacts from Russia’s invasion of Ukraine. read more
Malpass gave no details on when a global recession could begin.
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