The World Bank’s chief economist has warned that Russia’s invasion of Ukraine might trigger a global recession if food, gasoline, and fertiliser prices rise. On Wednesday, David Malpass said it’s tough to “see how we avoid a recession” during a US business event.
A number of coronavirus lockdowns in China, he added, are contributing to concerns about a slowdown. His remarks are the latest warning about the growing possibility that the global economy may contract.
“As we look at the global GDP… it’s hard right now to see how we avoid a recession,” Malpass said, without giving a specific forecast.
“The idea of energy prices doubling is enough to trigger a recession by itself,” he added.
The World Bank slashed its global economic growth prediction for this year by nearly a full percentage point, to 3.2 per cent, earlier this month.
Gross Domestic Product (GDP) is a metric for measuring economic growth. Economists and central banks keep a close eye on it since it is one of the most essential means of determining how well, or poorly, an economy is operating.
It aids firms in determining whether or not to expand and hire more workers, or whether or not to invest less and reduce their staff.
It is also used by governments to guide choices on everything from taxation to expenditure. It, along with inflation, is a significant indicator for central banks when deciding whether or not to raise or cut interest rates.
Many European countries, according to Malpass, are still excessively reliant on Russia for oil and gas.
Even as Western countries go forward with measures to minimise their reliance on Russian energy, this is the case.
He also said that measures by Russia to reduce gas supplies might cause a “significant slowdown” in the region during a virtual event hosted by the US Chamber of Commerce. Higher energy prices, he claimed, were already dragging on Germany’s economy, which is Europe’s and the world’s fourth largest.
Fertilizer, food, and energy shortages also harm developing countries, according to Malpass.
Malpass also expressed alarm about lockdowns in some of China’s key cities, including Shanghai, the country’s financial, manufacturing, and shipping powerhouse, which are “still having ramifications or slowing impacts on the world,” according to Malpass.
“China was already going through some contraction of real estate, so the forecast of China’s growth before Russia’s invasion had already softened substantially for 2022,” he said.
“Then the waves of Covid caused lockdowns which further reduced growth expectations for China,” he added.
China’s premier, Li Keqiang, said on Wednesday that the newest wave of lockdowns had affected the world’s second largest economy harder than when the pandemic began in 2020.
He also demanded that officials take more steps to reopen factories following lockdowns.
“Progress is not satisfactory,” Li said. “Some provinces are reporting that only 30% of businesses have reopened… the ratio must be raised to 80% within a short period of time.”
In March and April, dozens of Chinese cities were placed under full or partial lockdown, including Shanghai, which was shut down for several days.
As a result of the measures, economic activity has slowed dramatically across the country.
Official numbers in recent weeks have revealed that significant segments of the economy, from manufacturing to shops, have been damaged.
(Adapted from News18.com)