The World Bank has lowered its global growth forecast for this year to 3.2%, down from a previous prediction of 4.1% expansion as numerous headwinds drag on the economy.
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The problems pushed the bank to target a new emergency financing window of $170 billion for the world’s lowest-income nations, World Bank President David Malpass told reporters Monday. The details still need to be discussed with the board in the coming weeks, he said.
The “crisis response envelope,” to be deployed over 15 months, intends to build on efforts from early phases of the COVID-19 pandemic. The bank mobilized $157 billion back then, Malpass said.
As the bank’s yearly Spring Meetings get underway, he warned that the world faces “severe overlapping crises.”
Threats: Malpass listed multiple shocks striking at once. COVID-19 remains a threat, inflation is high, and Russia’s invasion of Ukraine — along with the pandemic shutdowns in China — are adding to the woes. Food, fertilizer, and energy are seeing sudden price increases.
“The world changed for the worse in February and March with the Russian invasion,” Malpass said.
He cautioned that all of this would lead to rising interest rates, making the current debt crisis more acute. The bank president reiterated previous warnings that 60% of the world’s lowest-income countries already face debt distress or are at high risk.
Crisis response envelope: The new crisis envelope aims to mobilize $50 billion in the next three months, Malpass said, in part by reallocating funds from IDA19 — the most recent cycle of the International Development Association — before the IDA20 round starts in July. IDA is the bank’s fund for the lowest-income nations.
Malpass said the bank would also continue to raise funding for Ukraine and neighboring countries. Currently, the bank is targeting $3 billion for Ukraine and has announced the mobilization of $2.4 billion, some of which is still pending final approval.
About the author
Shabtai Gold
Shabtai Gold is a Senior Reporter based in Washington. He covers multilateral development banks, with a focus on the World Bank, along with trends in development finance. Prior to Devex, he worked for the German Press Agency, dpa, for more than a decade, with stints in Africa, Europe, and the Middle East, before relocating to Washington to cover politics and business.
