The growth in emerging and developing economies are expected to roughly halve to 3.4 per cent in 2022 in comparison to 6.6 per cent the previous year, as the spillover effects led by the Russian invasion of Ukraine has adversely affected these nations, the World Bank said in its latest report titled ‘Global Economic Prospects’. At 3.4 per cent, these economies will be well below their average growth of 4.8 per cent during 2011-19.
“The slowdown in part reflects the spillovers from the war in Ukraine, which have led to commodity price volatility, higher input costs, trade disruptions, and weaker confidence. These spillovers are also magnifying the effects of preexisting headwinds to growth, including rising inflationary pressures, tightening financial conditions, continued withdrawal of macroeconomic policy support, and softening external demand,” the report said. Since households in the emerging economies devote a relatively large proportion of their spending to basic necessities, the war’s impact on food and energy prices is also weighing mark on their consumption, it added.
“This is especially true among commodity importers, whereas energy exporters are benefitting from higher global energy prices and easing oil production cuts,” the report added. Notably, consumer inflation has climbed higher around the world and is above central bank targets in most countries. In the backdrop of the ongoing conflict in Ukraine, the risk of stagflation–a combination of high inflation and sluggish growth–has also risen.
Taking these factors into consideration, the growth in India is expected at 7.5 percent in the financial year 2022-23, which is a 1.2 percentage points downward revision from its January projections. In 2023-24, the growth is expected to slow down even further to 7.1 per cent, it added.
In the South Asia region excluding India, GDP growth, after peaking at 5.7 percent in the financial year 2021-22, is now projected to slow down to 4.0 percent in 2022-23.