Thu. Sep 29th, 2022

Prof. ST Hsieh

Director, US-China Energy Industry Forum

626-376-7460

[email protected]

June 7, 2022

Everyone should take World Bank warning of global recession very seriously. But Ukraine war is the latest straw breaking camel’s back. The de-globalization initiated by President Trump successfully interrupted the global supply chain. Then the outbreak of COVID-19 global pandemic severally strained the global supply chain for more than two years, there is no economic recovery yet.

Yet Ukraine war, with no cease fire in sight, is decomposing global energy market, as well as the global economy, to unknown territory.

The world is heading to uncertainty, it seems no off ramp is available. But man starts war and man can stop war, in fact only man can stop war. The challenge is even if Ukraine war suddenly reached cease fire right now, the global economy is ruined and would take a global effort to re-start the economic engines. While Europe is fully engulfed by the Ukraine war, only US and China are ready to take the lead for a global recovery. However, if US and China are facing off with a trade war, then all bets are off: darker days are ahead, for everyone!

One interesting perspective is that World Bank projects China will grow at 4.3 percent, while US will grow 2.5 percent. If so, President Biden’s boast that US growth rate, under his leadership, will outpace China?

But President Biden could focus on ending the Ukraine war, and he will be honored with Nobel Peace Medal.

World Bank warns of recession risk due to Ukraine war

The World Bank has downgraded its growth forecast for this year’s global economy, and warned against rising prices and an economic slowdown.

The bank said on Tuesday that it expects the global economy to grow 2.9 percent in 2022, down 1.2 percentage points from its estimates in January.

The forecast was lowered 1.7 percentage points for the eurozone and 1.2 percentage points for the United States. The bank expects both economies to expand 2.5 percent.

Growth for the Chinese economy is expected to fall 0.8 percentage points from the previous estimates to 4.3 percent. The Japanese economy is now projected to expand 1.7 percent, down 1.2 percentage points.
The downgrades are attributed to surging energy and grain prices following Russia’s invasion of Ukraine and monetary tightening measures to curb inflation in leading economies.

The World Bank expects Russia’s economy to shrink 8.9 percent, and Ukraine’s economy to decrease 45.1 percent.

The World Bank President David Malpass said, “The war in Ukraine, lockdowns in China, supply-chain disruptions and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid.” In stagflation, prices rise and the economy slows down at the same time. The bank also expressed concern over food shortages and worsening poverty in developing countries.

He warned in the World Bank’s Global Economic Prospects report for June that the danger of stagflation was “considerable”.

“Subdued growth will likely persist throughout the decade because of weak investment in most of the world. With inflation now running at multi-decade highs in many countries and supply expected to grow slowly, there is a risk that inflation will remain higher for longer.”

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