War in Ukraine may trigger global recession, says World Bank chief: Report

Updated on May 26, 2022 04:02 PM IST

Last month the World Bank reduced 2022 global growth forecasts from 4.1 per cent to 3.2 per cent - due to the impact of Russia's war on Ukraine.

Unauthorised weekly vegetable markets have once again resumed in the Pune corporation limits after the easing of Covid curbs. (HT FILE PHOTO)
Unauthorised weekly vegetable markets have once again resumed in the Pune corporation limits after the easing of Covid curbs. (HT FILE PHOTO)

Russia's war on Ukraine could trigger a global recession because of the impact on food, energy and fertiliser prices, with developing nations among the worst affected World Bank president David Malpass said Wednesday. He said that while Ukraine and Russia would likely see significant contractions, Europe, and the United States were seeing slower growth. On China he said the relatively sharp slowdown was due to Covid, inflation and a pre-existing real estate crisis.

"As we look at global GDP... it's hard right now to see how we avoid a recession. The idea of energy prices doubling is enough to trigger a recession by itself," he was quoted by Reuters. He did not give details on when it might begin.

The World Bank chief's warnings are one of several about increased global risks, driven most recently by the war in Ukraine but also fuelled by a Covid-19 pandemic and associated restrictions that are now in its third year.

A day before Malpass' warning the Institute of International Finance slashed 2022 growth outlook for global output from 4.6 per cent to 2.3 per cent.

It pegged US, Japan and Euro region growth at 1.9 per cent and China from 5.1 per cent to 3.5 per cent. "Global recession risk is elevated..." the IIF said.

The risk of a worldwide recession has also been flagged at the ongoing World Economic Forum in Davos, with concern over inflation at its highest level in a generation in major economies including the United States, Britain and Europe.

Last month the World Bank reduced 2022 global growth forecasts from 4.1 per cent to 3.2 per cent - due to the impact of Russia's war on Ukraine.

The World Bank also said it would make $30 billion available to help stem a food security crisis after grain exports from Russia, Ukraine were cut off.

READ: World Bank to offer $30 billion as Ukraine war threatens food security

For India the World Bank in April lowered growth estimates from 8.7 per cent to 8 per cent, business publication Live Mint reported. This was on the basis of worsening supply bottlenecks and rising inflation risks due to the war.

In India retail prices grew at 7.8 per cent - the highest in eight years - squeezing household budgets and likely paving the way for more monetary action by the Reserve Bank of India, which raised rates last week to combat spiking inflation.

READ: Retail inflation rises to 7.8 per cent, highest in eight years

China, meanwhile, has also sounded an alarm bell. 

According to AFP, citing a readout by the official Xinhua news agency, premier Li Keqiang told a State Council meeting on Wednesday that challenges now are 'greater than when the pandemic hit hard in 2020'.

China is a key driver of global growth but has been badly affected by a 'zero Covid' policy that has left manufacturing hubs of Shenzhen and Shanghai, the latter of which faces a strict lockdown, and agricultural centres, in bad shape.

Fears over strict lockdowns in capital Beijing next have not helped.

With input from AFP, Reuters

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