Omicron, Supply-Chain Troubles to Slow Growth, World Bank Says

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The bank has forecast a growth of 4.1% in 2022, down from last year’s 5.5%

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The report says that the growth rate will slow to 3.2 percent in 2023.

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“At a time when governments in many developing economies lack the policy space to support activity when needed, the outbreak of the new COVID-19, persistent supply-chain bottlenecks and inflationary pressures, and large areas of the world Higher financial vulnerabilities in the U.S. can increase the risk. A hard landing,” the World Bank said.

The forecast said the omicron variant, first detected in South Africa in November, may cause less severe disease than the earlier virus, but its rapid spread could affect depleted health systems and That could prompt some governments to renew the lockdown, hindering growth.

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In the US, an average of more than 750,000 daily cases were reported each of the seven days to Monday, close to three times the previous record set last winter, according to data collected by Johns Hopkins University. France, Italy, Netherlands and Canada are the other countries currently reporting record case numbers according to Our World in Oxford University data.

The Washington-based World Bank, the world’s largest development bank focused on ending global poverty, also said the global economy is at risk for new forms of the virus because of vaccine coverage compared to emerging market and low-income countries. It is very little. in advanced economies.

Nevertheless, the slowdown is likely to affect most major economies. According to the forecast, the US growth rate will slow from 5.6 percent to 3.7 percent, while China’s growth rate will slow from 8% to 5.1 percent.

However, some economies will buck the trend, and grow more strongly in 2022, especially those that have remained quite vulnerable during the pandemic, such as many Southeast and East Asian economies.

Japan, Indonesia, Thailand, Malaysia and Vietnam are expected to strengthen in 2022.

The global economy performed better in 2021 than what the World Bank had forecast a year ago. A year ago, the World Bank had expected growth of 4% for 2021, well shy of the 5.5% it is now.

But even as much of the world withdrew from the pandemic faster than expected, a new kind of challenges emerged, including a deteriorating supply chain and rising inflation. With virus-related factory closures in many countries, international trade and industrial production were halted due to severe disruptions to global supply chains.

The World Bank provided some estimates of the impact of the disruptions, saying they suppressed international trade by 8.4% and industrial production by 6.9%, compared to how much activity would have occurred in a normally functioning international system.

The World Bank said that by mid-2021, global trade was 5% higher than in December 2019. But without the disruptions, trade would have grown by 13.4%, potentially allowing the world to enter 2022 more strongly.

The World Bank said in its assessment that the disruption was “mostly triggered by factors that are likely to be temporary, including pandemic-related factory and port closures, weather-induced logistics constraints, and severe shortages of semiconductors and shipping containers.” “

The World Bank said it is anticipated that supply constraints and labor shortages will gradually end throughout 2022 and that inflation and commodity prices will also decline gradually in the second half of the year. Underlying demand for durable goods, a force exerting so much pressure on supply chains, is likely to moderate along with a slowing global economy.

Write Josh Zumbrun at [email protected]

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