The World Bank has stated in its January 2022 Global Economic Prospects report that the global economy is due to enter a noticeable slowdown amid fresh threats from Covid-19 variants and a rise in inflation, debt, and income inequality that could endanger the recovery in emerging and developing economies.
According to the report, global growth is expected to reduce from 5.5 per cent in 2021 to 4.1 per cent in 2022 and 3.2 per cent in 2023, as pent-up demand dissipates and as fiscal and monetary support is unwound across the world.
The report further notes that “The rapid spread of the Omicron variant indicates that the pandemic will likely continue to disrupt economic activity in the near term.”
“In addition, a notable deceleration in major economies – including the United States and China – will weigh on external demand in emerging and developing economies.
“The world economy is simultaneously facing COVID-19, inflation, and policy uncertainty, with government spending and monetary policies in uncharted territory. Rising inequality and security challenges are particularly harmful for developing countries,” World Bank Group President David Malpass has stated.
Meanwhile, the World Bank has forecasted a 5.5 per cent expansion in the Ghanaian economy in 2022.
The projected growth rate is lower than the International Monetary Fund’s projected rate of 6.2 per cent, but higher than Sub-Saharan Africa’s average of 3.6 per cent. The government of Ghana is however projecting an overall GDP growth of 5.8 per cent in 2022.
According to the report from the World Bank, Ghana will become one of the fastest growing economies in Sub Saharan Africa.
The report said elevated commodity prices are projected to both support recovery in extractive sectors and boost export and fiscal revenues. This is expected to help ease some pandemic induced fiscal pressures and external financing needs.
The report observed that many Sub Saharan Africa countries, including Ghana and Rwanda, had witnessed a striking deterioration in fiscal balances because of deployed relief measures, depleting already-narrow fiscal space.
It predicts that this, together with constraints on financing and pressures to improve debt sustainability, will lead to a much less supportive fiscal stance across the region over the forecast horizon.
“Fiscal adjustments are expected to predominantly happen on the expenditure side with a bigger reduction in fiscal deficits in resource-rich countries, partly reflecting revenue boosts from higher commodity prices and consolidation efforts in some countries,” it added.
The report however said fiscal space is expected to remain tight with below-trend recoveries restraining revenue growth, elsewhere in the region.
According to World Bank Group President David Malpass, “putting more countries on a favourable growth path requires concerted international action and a comprehensive set of national policy responses.”
Also, in the view of Ayhan Kose, Director of the World Bank’s Prospects Group, “in light of the projected slowdown in output and investment growth, limited policy space, and substantial risks clouding the outlook, emerging and developing economies will need to carefully calibrate fiscal and monetary policies. “
“They also need to undertake reforms to erase the scars of the pandemic. These reforms should be designed to improve investment and human capital, reverse income and gender inequality, and cope with challenges of climate change,” he added.
According to Mari Pangestu, the World Bank’s Managing Director for Development Policy and Partnerships, “the choices policymakers make in the next few years will decide the course of the next decade.”
“The immediate priority should be to ensure that vaccines are deployed more widely and equitably so the pandemic can be brought under control. But tackling reversals in development progress such as rising inequality will require sustained support. In a time of high debt, global cooperation will be essential to help expand the financial resources of developing economies so they can achieve green, resilient, and inclusive development,” he has posited.