The World Bank has sharply downgraded its outlook for the global economy, pointing to Russia’s war against Ukraine, the prospect of widespread food shortages and concerns about the potential return of “stagflation” — a toxic mix of high inflation and sluggish growth unseen for more than four decades.
The 189-country anti-poverty agency predicted Tuesday that the world economy will expand 2.9 per cent this year. That would be down from 5.7 per cent global growth in 2021 and from the 4.1 per cent it had forecast for 2022 back in January.
“For many countries, recession will be hard to avoid,” said David Malpass, the World Bank’s president.
The agency doesn’t foresee a much brighter picture in 2023 and 2024: It predicts just three per cent global growth for both years.
For the United States alone, the World Bank has slashed its growth forecast to 2.5 per cent this year from 5.7 per cent in 2021 and from the 3.7 per cent it had forecast in January. For the 19 European countries that share the euro currency, it downgraded the growth outlook to 2.5 per cent this year from 5.4 per cent last year and from the 4.2 per cent it had expected in January.
In China, the world’s second-biggest economy after the United States, the World Bank expects growth to slow to 4.3 per cent from 8.1 per cent last year. China’s zero-COVID policies, involving draconian lockdowns in Shanghai and other cities, brought economic life to a standstill. The Chinese government is providing aid to ease the economic pain.
Emerging market and developing economies are collectively forecast to grow 3.4 per cent this year, decelerating from a 6.6 per cent pace in 2021.
WATCH | Food banks brace as rising inflation pushes need:
Food banks brace for summer of hunger
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Food banks across the country are bracing for a summer of hunger as rising inflation pushes more Canadians to rely on charitable services.
War in Ukraine disrupts trade
Russia’s invasion of Ukraine has severely disrupted global trade in energy and wheat, battering a global economy that had been recovering robustly from the coronavirus pandemic. Already-high commodity prices have gone even higher as a result, threatening the availability of affordable food in poor countries.
“There’s a severe risk of malnutrition and of deepening hunger and even of famine,” Malpass warned.
The World Bank expects oil prices to surge 42 per cent this year and for non-energy commodity prices to climb nearly 18 per cent. But it foresees oil and other commodity prices both dropping eight per cent in 2023. It likened the current spike in energy and food prices to the oil shocks of the 1970s.
WATCH | War in Ukraine halts grain exports:
Ukraine grain exports obstructed by Russian invasion
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Duration 2:32
More than 20 million tonnes of harvested Ukrainian grain is stuck inside the country because of Russia’s blockade of major ports.
“Additional adverse shocks,” the agency warned in its new Global Economic Prospects report, “will increase the possibility that the global economy will experience a period of stagflation reminiscent of the 1970s.”
The prospect of stagflation poses a dilemma for the Federal Reserve and other central banks: If they continue to raise interest rates to combat inflation, they risk causing a recession. But if they try to stimulate their economies, they risk driving prices higher and making inflation an even more intractable problem.
The World Bank noted that the previous period of stagflation required rate increases so steep that they tipped the world into recession and led to a series of financial crises in the poor countries of the developing world.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
