World Bank warns about prospects for the global economy in 2022 but trade is set to grow

Wed 12 Jan 2022
Posted by: William Barns-Graham
Trade News

global recovery

The World Bank has predicted a slowdown in economic growth this year as Covid-19 threats continue, government aid is reeled in and demand declines.

Its president, David Malpass, said the poorest countries would be hardest hit, resulting in growing inequality.

The Bank’s prediction for growth is 4.1% this year, down from 5.5.% in 2021.

Insecurity

“The outlook for the weaker countries is still to fall further and further behind. That causes insecurity,” he told the BBC.

Malpass added that rising interest rates would also disproportionately affect developing countries with output 4% lower than pre-pandemic.

Global gloom

In another gloomy report, only one in 10 World Economic Forum (WEF) members expect the global recovery to accelerate over the next three years.

The WEF poll of nearly 1,000 business, government and academic leaders, reported in Reuters, found only one in six were optimistic about the world outlook.

Other challenges

The report also highlighted the failure to act on climate change as the biggest challenge facing economies, with the potential to shrink GDP by one sixth.

Other areas of emerging risk highlighted include cybersecurity, a disorderly climate transition, migration pressures and competition in space.

Trade growth

Other reports paint a more optimistic picture, particularly around global trade.

Trade credit insurance company Euler Hermes predicts that although supply chain issues will continue to trouble companies into the second half of 2022, global growth will reach 5.4% nonetheless.

Its Global Trade Report also points out that Europe is more at risk than the US from a reliance on China for inputs and that unless there is investment in production capacity and logistics infrastructure, bottlenecks could be normalised heading into 2023.

It notes no clear trend for reshoring but says protectionism reached a high last year and will remain elevated through the use of non-tariff barriers such as subsidies and industrial policy.

IHS Markit

IHS Markit’s Global Trade Outlook for 2022 concurs that supply chain issues will remain an issue in H1 of 2022 and predicts a year-on-year growth of 4.4%.

It concludes that global trade has already returned to levels seen before the pandemic, but that growth rates peaked in Q2 2021 and have since moderated.