IIF, Forecast Cut from 4.6% to 2.3%... World Bank President Warns "Inflation Poses Global Economic Recession Risk"
[Asia Economy Reporter Park Byung-hee] As the Russia-Ukraine war prolongs, forecasts are emerging that the global economic growth rate will remain in the 2% range this year. Last year, the global economic growth rate nearly reached 6%. David Malpass, President of the World Bank (WB), has warned of a global economic recession.
The Institute of International Finance (IIF) lowered its global economic growth forecast for this year from 4.6% to 2.3% on the 25th (local time). Earlier, S&P Global Market Intelligence also downgraded its global economic growth forecast for this year from 3.2% to 2.9% on the 23rd.
The IIF analyzed that Russia's invasion of Ukraine, China's COVID-19 prevention policies, and the U.S.'s monetary policy tightening are negative factors for the global economy, increasing the risk of a worldwide recession.
The IIF expects the U.S. economic growth rate, which was 5.7% last year, to fall to 2.5% this year. China's economic growth forecast for this year was also lowered from 5.1% to 3.5%. The IIF pointed out, "The impact of the Omicron spread on the Chinese economy is greater than expected," adding, "It will place a significant burden on growth rates and capital flows."
Due to Russia's invasion of Ukraine, the Eurozone's economic growth forecast was revised downward from 3% to 1%.
With increasing global economic risks, the IIF expects foreign investment inflows into emerging markets to sharply decline by 42%, from $1.68 trillion last year to $972 billion this year. In particular, investment in China is expected to be halved from $668 billion to $327 billion.
S&P warned of inflation risks while lowering its economic growth forecast. S&P expects the global inflation rate, which was 3.9% last year, to reach 6.7% this year. It forecasts global inflation to ease to 3.7% next year and 2.7% in 2024. This implies that high inflation exceeding the major countries' monetary policy target of 2% will persist until 2024.
S&P expects the U.S. economic growth rate to slow significantly from 5.7% last year to 2.4% this year. It also forecasts 2.4% growth for next year.
President Malpass warned that the risk of a global economic recession due to inflation has increased. At an event hosted by the U.S. Chamber of Commerce that day, Malpass said the Russia-Ukraine war has raised prices of food, energy, and fertilizers, causing widespread inflation, and that finding ways to avoid a recession is not easy. He stated that the fact that energy prices have doubled alone is sufficient to trigger a recession.
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