He warns of the risk of stagflation and calculates that the eurozone will grow only 2.5% this year, 1.7 points less than expected
Stagflation is coming, a bad economic phase that combines very high price levels with years of slow economic growth and high unemployment. It’s a phenomenon the world hasn’t seen since the 1970s, assures the World Bank in its Economic Perspectives report published this Tuesday, warning that the global economy will only grow by 2.9%, while in January, before the war in Ukraine broke out, his prediction was 4.1%.
And those who will suffer the most will be the European countries because of their proximity to the armed conflict. The Washington-based body expects euro-zone activity to grow 2.5% this year, down -1.7 points from January’s progress, reflecting the slowdown in the first half of 2022 caused by the Russian crisis. invasion of Ukraine and the new outbreaks of covid-19 with the omicrom variant at the beginning of the year.
It warns that war is leading to ever higher energy prices, serious supply chain problems and tighter financial conditions. The organization emphasizes that the subsidies and economic aid that the majority of powers in the eurozone – such as Spain – give their citizens will help to “dampen” the impact on families of the high energy price.
The problem, he says, is that controlling energy prices by governments is a policy that “can lead to market distortions and environmental problems.” The organization advocates other responses to the energy crisis “much more effective and beneficial”, such as betting on renewable energy sources. “Governments should prioritize policies that promote greater energy efficiency and accelerate the transition to low-carbon energy sources.”
And to ease home electricity bills, states must provide “temporary aid” to vulnerable groups rather than energy subsidies for all, which will only create “distortions and fiscal imbalances.”
In this regard, the World Bank predicts that the eurozone will grow by only 1.9% in 2023 and 2024 as the war “will continue to weigh on activity”, while the European Central Bank (ECB) has already tightened its monetary policy with increasing interest rates. in the month July.
All because European countries are “particularly dependent” on energy imports from Russia, especially gas, which still accounts for about 35% of total imports, the agency says. In addition, while the rest of Russian exports don’t limit European trade so much, supply chain problems will exacerbate financial tensions and lower private consumption and business confidence, they warn.
In fact, the report warns that the higher energy price will lead to a decline in demand, which will mean a major change in the incomes of the largest importers. His calculations suggest that the rise in prices caused by the war could reduce world energy production by 0.8% over the next two years.
This is one of the reasons why the Russian economy will contract by 8.9% this year, due to a sharp drop in demand and the collapse of exports. In 2023, GDP will continue to decline by 2% due to the impact of a partial embargo on Russian oil and gas. But things will get worse in Ukraine, the agency estimates GDP will fall by about 45% this year and the poverty rate – citizens living on less than $5.5 a day – will rise from 2% to 20% . population in 2022.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
