The World Bank report notes that the global economic recovery will slow significantly as the COVID-19 pandemic continues to spread, policy support across economies diminishes, and supply chain bottlenecks persist
Social activities are frequent during the New Year's holiday, and the epidemic in many countries has rebounded significantly. Photo/ Caijing reporter Jin Yan
Wen | Special Correspondent of Caijing Jin Yan sent from Washington
Edited | Su Qi
The World Bank's latest Global Economic Prospects report, released on January 11, notes that global growth is entering a period of significant slowdown, from 5.5% in 2021 to 4.1% in 2022 and further to 3.2% in 2023. Growth of 4.1% in 2022 will be lower than in 2021 for reasons such as the impact of the COVID-19 variant of Omilon, supply chain disruptions, labor shortages, and the government's phasing out of economic support measures.
The accelerated global spread of the Omiljun strain is the main reason for the worsening of this round of the epidemic. The rapid spread of the Omiljunn variant means that the COVID-19 pandemic is likely to continue to disrupt economic activity in the near future. The head of the European region of the World Health Organization (WHO) said at a press conference on the 11th that the new mutant strain of the new coronavirus, Olmikron, has spread rapidly, and it is expected that more than half of the population in the jurisdiction (including the countries of the former Soviet Union and Turkey) will be infected in the next 6 to 8 weeks. The WHO Regional Office for Europe is the region with the worst spread of the epidemic in the world.
According to the latest statistics released by Johns Hopkins University in the United States, there were nearly 1.5 million new confirmed cases of new coronavirus in the United States on the 10th, setting a new high since the outbreak of the epidemic. The US Center for Disease Control and Prevention said on the 11th that the Olmikron strain is now the main strain in the United States, accounting for 98.3% of the new cases in the United States. Due to the surge in the number of confirmed and hospitalized cases, the U.S. health care system is facing a shortage of personnel. U.S. media reported that at least 10 states have deployed National Guard members to support understaffed hospitals.
The WHO pointed out in the epidemic report on the 11th that the Omiljung strain "even vaccinated people and people who have recovered from infection with the new crown virus will also be infected", believing that "a large amount of evidence proves that the strain can break through immunity", calling for not only relying on vaccines, but also taking other epidemic prevention measures. THE WHO outbreak report shows that Omiljung is less susceptible to severe illness compared to other mutant strains. In addition, initial data suggest that the vaccine may be less effective than the Delta strain, but it is still effective in reducing severe illness and mortality.
According to the data released by the World Health Organization on the 10th, the cumulative number of confirmed cases of new crown in the world has exceeded 300 million, and the cumulative number of deaths has reached nearly 5.49 million. Experts warn that people who have not yet been vaccinated will be "severely shocked" as a result. Photo/ Caijing reporter Jin Yan
The World Bank report notes that the global economic recovery will slow significantly due to the spread of COVID-19, reduced policy support among economies, and persistent supply chain bottlenecks, with output in emerging market and developing economies expected to remain significantly lower than pre-pandemic levels. Not only that, but a slowdown is likely to affect most major economies. Growth in the United States is forecast to slow from 5.6 percent to 3.7 percent, while China's growth will slow from 8 percent to 5.1 percent. A slowdown in growth in major economies, including the United States and China, will weigh down external demand in emerging market and developing economies.
East Asia and the Pacific are expected to slow to 5.1 percent growth in 2022, reflecting the impact of China's economic slowdown, the report said. China's GDP is estimated to grow by 8% in 2021, mainly due to macro-supported exits and faster-than-expected regulatory tightening.
Due to the continued impact of the COVID-19 pandemic and the Chinese government's tightening of regulations on certain sectors of the economy, China's economic growth is expected to slow to 5.1% in 2022, close to the potential growth rate. Most economists believe that China may escalate its containment policies, which will further affect economic growth, which in turn will hit Chinese manufacturing companies and disrupt port activity. Taking into account the latest developments in the new crown epidemic, Goldman Sachs lowered China's economic growth forecast for 2022 from 4.8% to 4.3% on January 11.
Meanwhile, a survey of nearly a thousand business, government and academic leaders found that only one in ten Members of the World Economic Forum expects the global recovery to accelerate over the next three years, and only one-sixth is optimistic about the world economic outlook.
Bülent Baygün, deputy chief investment officer and quantitative strategist at DeepMacro, told Caijing that the theme of the global macro economy at the end of 2021 continues into the new year: rising inflation proves that inflation is not "temporary", concerns about higher interest rates, and uncertainty brought about by another sharp increase in global COVID-19 cases have exacerbated people's concerns. While these factors are enough to raise concerns about future growth, in fact economic growth remains solid. Take, for example, the US non-farm payrolls in December: While overall data is weak, the labor market itself is fairly healthy. There is enough evidence to prove this in household surveys, where employment rates are rising and unemployment is currently below 4 percent.
A few days ago, the US Senate Banking Committee held a hearing on the nomination of Powell for re-election as chairman of the Federal Reserve, at which Powell said that the US economy is healthy enough to tighten monetary policy, while expressing concerns about inflation and emphasizing the Determination of the Fed to take necessary measures to control price increases. He noted that, in a way, the balance sheet could be allowed to shrink later this year. "If things go as expected, we're going to normalize policy, which means we're going to end asset purchases in March, which means we're going to raise rates this year, and maybe later in the year we're going to start allowing the balance sheet to run, and that's just the path to policy normalization."
The World Bank report projects global economic growth of 5.5 percent in 2021, the strongest post-recession growth rate in 80 years. Byrgan believes that in the second half of 2021, economic growth has once again gained momentum, reversing the slow downward trend and returning to trend growth. At the same time, inflation has undeniably taken center stage and will continue if central banks do not act.
The report points out that the global economy faces a number of downside risks, including a rebound in the rapid spread of the mutant new coronavirus Omiljun strain, soaring inflation expectations, and financial pressures due to record high debt levels. At the same time, climate change could exacerbate commodity price volatility, posing a challenge to emerging market and developing economies.
The report notes that the lack of policy space for governments in many developing economies to support economic activity when necessary, in a situation where the spread of new variants of the virus, ongoing supply chain bottlenecks and inflationary pressures, and increased financial vulnerability in much of the world mean that the risk of a hard landing could rise.
With limited policy space in emerging market and developing economies, these downside risks will "increase the likelihood of a hard landing."
World Bank President Malpass said that global macroeconomic imbalances have reached unprecedented levels, income inequality between and within economies is widening, and the global economy is facing unprecedented uncertainty. He called on the international community to strengthen coordinated action and policy response at the national level to achieve healthy growth among economies around the world.