Global GDP is projected to slow down to 2.9 per cent from 5.1 per cent in 2021, dispelling any hope of averting an excruciating and protracted recession.
According to the World Bank, the war in Ukraine, rising food prices, surging energy costs and disruption in the global supply chain are wreaking havoc on large and small economies alike. The slowdown in economic output could last up to a decade.
The last time the global economy was rocked simultaneously by weak growth and surging consumer prices, also known as stagflation, was in the 1970s. According to experts, the situation could get worse if the Russian invasion of Ukraine continues to strain and choke global financial and supply chain networks. This will exacerbate food prices and spark social upheaval in food-importing countries such as Egypt, Lebanon and Somalia.
Developing countries could grow poorer and hungrier, with an estimated 75 million more people falling into poverty. Public debt for many African countries is expected to surge as interest rises and increases the cost of borrowing.
According to the World Bank, limited trade and financial linkages with Eastern Europe will help blunt the direct negative effects of the Ukraine war on sub-Saharan Africa. However, countries like DR Congo, Ethiopia, Madagascar and Tanzania, which rely heavily on grain imports from Russia and Ukraine, will be saddled with high food prices in the short to medium term.
A recession in Europe is inevitable, with the continent struggling to accommodate millions and grappling with catastrophic uncertainty in energy supplies in the summer and into the winter. The Russia-Ukraine war will be felt through commodity prices, trade, financial markets and migration. An estimated seven million Ukrainian women and children have crossed into Europe to avoid the violence.
Moreover, China’s economy, the second-largest in the world and the engine for the prosperity of many African countries, is projected to slow down from eight per cent in 2021 to just 4.5 per cent in 2022. China remains at risk of a surge in Covid-19 outbreaks, which could touch off crippling economic disruption, further weakening the global economic outlook.
In the US, inflation has risen to a 40-year high. According to Bloomberg, record fuel prices, coupled with soaring food and housing costs are driving an unprecedented rise in the cost of living for ordinary Americans. However, unlike Europe and Asia, the US is less dependent on Russian energy and hence less vulnerable to the Ukraine war.
The World Bank’s downbeat forecast brings a sharp focus on how uncertain and fragile the global economy is. Having barely recovered from a devastating global pandemic, this vortex of economic stagnation could very well characterise this decade. The United Nations has warned about the long-term economic and human well-being effects of Covid-19.
Covid-19 impacts coupled with the Russia-Ukraine war, and God forbid US-China confrontation over Taiwan, could make this a lost decade for development, with long-term effects on Africa. We must muster the best of global leadership and diplomacy to avert an economic catastrophe.
The views expressed are the writer’s
