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World Bank Warns of Impending Stagflation

The World Bank shrunk its global growth forecast and cited several international economic stressors as cause for concern, according to The Washington Post (subscription).

The numbers: The World Bank cut its annual global growth forecast to 2.9%, down 1.2% from January, and said “subdued growth will likely persist throughout the decade because of weak investment in most of the world.”

“Overlapping crises”: The World Bank views repeated COVID-19 lockdowns in China, the highest inflation in decades and Russia’s war in Ukraine as “overlapping crises” that increase the likelihood of an extended period of global stagflation (in which inflation rates are high and economic growth is weak).

  • It is the first time the global economy faces such a serious risk of stagflation since 1970, when oil crises stalled economic growth and raised prices.

Who’s at risk: “The risk from stagflation is considerable with potentially destabilizing consequences for low- and middle-income economies,” said David Malpass, president of the World Bank. “There’s a severe risk of malnutrition and of deepening hunger and even of famine in some areas.”

However, economists predict U.S. economic growth will rebound this quarter. Nathan Sheets, the global chief economist for Citigroup, said the chance of worrisome stagflation in the U.S. is “remote.”

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