World Bank’s Banga sees some degree of lower growth, higher inflation due to war
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World Bank president Ajay Banga said inflation could be affected by up to 0.9 percentage points.
PHOTO: AFP
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WASHINGTON – World Bank president Ajay Banga said on April 7 that the war in the Middle East would result in some degree of slower growth in the global economy and higher inflation, regardless of how quickly it ended.
Mr Banga, speaking at an event hosted by the Atlantic Council ahead of next week’s meetings of the World Bank and the International Monetary Fund, said the World Bank was able to quickly disburse billions of dollars in funding to countries affected by the war using its crisis windows, as it did during the height of the Covid-19 crisis.
He said the impact of the war would depend on the severity and duration of the disruption to energy markets. A rapid end to the conflict would allow some normalisation in the next few months, while a longer stretch would extend the impact for six to eight months.
“Either way, if you look at the world having a probable GDP (gross domestic product) growth of 2.83 per cent before this recent conflict, you’re probably impacting that between 0.3 per cent, 0.4 per cent in the baseline scenario, all the way to 1 plus per cent in the more challenging longer timespan,” he said.
Inflation could be affected by up to 0.9 percentage points, he added.
Mr Banga said he expected finance officials gathering in Washington to discuss how the two institutions could help countries hit hard by rising energy prices and supply chain disruptions as a result of the war.
“We as an institution can help because we’ve got certain kinds of response windows that we call crisis response windows,” he said, referencing World Bank rules that allow countries to request quick access to 10 per cent of undisbursed funds from previously approved programmes.
He added that countries reeling from the war could potentially access around US$30 billion (S$38.3 billion) through these “crisis windows” over the next two to three months, with up to US$70 billion available over the course of six months.
But he cautioned that countries should be wary of increasing their fiscal challenges by providing subsidies that they could not afford, or which could trigger even bigger problems in future years. REUTERS
