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WEF lowers its global economic growth forecast

THE majority of respondents to the WEF latest survey expected only a moderate economic outlook in all the regions, but the economic outlook was expected to be weak in Europe. Pictures: Reuters.

THE majority of respondents to the WEF latest survey expected only a moderate economic outlook in all the regions, but the economic outlook was expected to be weak in Europe. Pictures: Reuters.

Published May 24, 2022

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THE World Economic Forum (WEF) has further lowered its global economic growth forecast as the recovery has been disrupted by the war in Ukraine and continued Covid-19 surges, among other shocks.

The WEF Davos annual meeting concurred with the latest International Monetary Fund (IMF) forecast from April, which sees global growth dropping to 3.6 percent in 2022, from its January 2022 forecast of 4.4 percent.

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In its Chief Economists Outlook yesterday, the WEF pointed to five forces that will shape the global economic outlook this year.

It said that the war in Ukraine, monetary tightening and financial market volatility, fiscal withdrawal, China’s economic slowdown, and pandemic vaccine access had disrupted the recovery.

The majority of respondents to the WEF’s latest survey expected only a moderate economic outlook in all the regions, but the economic outlook was expected to be weak in Europe.

WEF managing director Saadia Zahidi said the war in Ukraine and the resurgence of Covid-19 had reversed previous expectations for recovery.

“We are at the cusp of a vicious cycle that could impact societies for years,” Zahidi said.

“The pandemic and war in Ukraine have fragmented the global economy and created far-reaching consequences that risk wiping out the gains of the last 30 years.

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“Leaders face difficult choices and trade-offs domestically when it comes to debt, inflation and investment.”

The WEF said economies in sub-Saharan Africa would be significantly affected by higher food prices, yet were nevertheless expected to grow on average by 3.8 percent, which is 0.1 percentage points higher than the January projection.

In their food security outlook for the next 3 years, survey respondents were united in their expectation of a highly insecure environment in sub-Saharan Africa as food inflation weighs in.

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Citadel’s chief economist Maarten Ackerman said that the prolonged Russia-Ukraine war was ushering in a new era of volatility and possible recession for South Africa and the world.

Ackerman said South Africa’s economic growth was expected to remain around only 2 percent over the next few years, given rising prices in essential commodities such as fuel, fertiliser and agricultural products.

“Now, with higher oil, gas and fertiliser costs, the agricultural sector must prepare for a tougher time through to 2023,” Ackerman said.

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“The risk of a recession has almost doubled since the start of the year, should the war not end soon.”

“Fortunately, we believe the global economy is not there yet and that global growth is sufficiently high to ensure that companies should remain quite profitable.

“Our view is that a recession is unlikely this year, but risks are mounting.”

The WEF meeting, which ends on Thursday, will see the leaders attempt to find solutions to the world's most urgent challenges, including climate change.

Speaking from Davos, Old Mutual Insure managing director Garth Napier said he had been engaging leading experts on how to finance the Just Transition on the road towards achieving Net Zero in an equitable way.

“One of our biggest challenges is how do we address climate change in a more sustainable way, working on an assumption that we are all going to reduce carbon emissions,” Napier said.

“We want to get investors to find balance in reducing emissions and keep the economy running. We want to ensure that stakeholders in South Africa are funding renewable energy.

“If we don’t halve our carbon emissions every decade until 2050, then we won’t make our emissions targets. It’s extremely difficult, but I won’t say that it is impossible.”

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