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According to the World Bank, factors including the war in Ukraine, fuel prices, and food shortages have caused a reduction in global growth.
The World Bank recently lowered its annual global growth forecast for 2022 from 4.1% to 3.2%. According to the global financial institution, there are several prevailing factors for the reduction, including the war caused by Russia’s invasion of Ukraine. During a conference call with reporters, World Bank President David Malpass explained the practical impact of the war. According to Malpass, this development would contract the economies of several nations across Europe and Central Asia.
The World Bank also offered several factors for the downturn in its forecast. The institution stated a rise in fuel and food costs currently suffered in several developed economies. As the war rages on and Western powers sanction Russia, the price of oil and gas has been on a steady rise.
According to the World Bank, supply disruptions to Ukrainian agricultural exports are partly responsible for the high prices. Currently, Ukrainian shipping vessels carrying vital exports face extreme danger if they attempt to navigate the major Black Sea ports. This is because the Russian navy has sealed off a critical channel that links Ukraine to the rest of the world.
World Bank Proposes Hefty Palliative Sum to Tide Over Decline in Global Growth
Malpass intimated that the World Bank had come up with a recourse to address the added war-induced economic stress. According to the president, the institution is proposing a new 15-month crisis financing target of $170 billion. As he put it to reporters:
“We’re preparing for a continued crisis response, given the multiple crises. Over the next few weeks, I expect to discuss with our board, a new 15-month crisis response envelope of around $170 billion to cover April 2022 through June 2023.”
Furthermore, Malpass explained that his platform sought to commit around $50 billion of this financing over the next three months.
The World Bank’s relief plan comes after its $160 billion Covid-19 financing program, even surpassing it by $10 billion. According to Malpass, a significant chunk of the sum will support countries harboring Ukrainian refugees. In addition, it will also go towards aiding countries that are currently experiencing food shortages.
Malpass stated that the World Bank and IMF member countries would be meeting this week to discuss new assistance for Ukraine. The Eastern European country’s economy has been the hardest hit due to President Vladimir Putin’s decision to invade it. Earlier this month, the World Bank estimated that Ukraine’s annual GDP would drop by a massive 45.1%. The optics for this are catastrophic, considering that analysts projected a sharp rise in Ukrainian GDP before the war.
However, to a lesser extent, the Russian economy is also taking a substantial hit owing to the increasingly stiff Western sanctions. In fact, early in the month, the World Bank also predicted that the GDP of Russia would decline by 11.2%.