World Bank/Köse: World economy on the edge of the knife

World Bank Chief Economist and Expectations Cluster Manager Ayhan Köse told Bloomberg HT the details of the “World Bank Global Economic Prospects” report they published this week. The risk of stagflation is lower than the previous 8 months…


World Bank Chief Economist and Director of Expectations Cluster Ayhan Köse stated that the world economy is going through a troubled period and they expect global growth to be 1.7 percent. Köse stated that this growth rate was the 3rd lowest growth rate in the past 30 years, and reminded that they experienced lower growth rates in 2009 and 2020.

Köse stated that they have reduced their growth claims in many countries of the world and said that they expect lower growth rates in almost all of the developed countries. Köse underlined that they expect the US growth rate to be 0.5 percent and that they will see the lowest growth rate of the US economy in the last 50 years outside the contraction years.

“Inflation is expected to decline”

Köse said that they think that there will be no growth in Europe, which has a high inflation rate together with the difficulties in finding strength in Europe, and that the growth rate will be 0 percent.

Saying that they expect better news from China in the second half, Köse said that they have reduced China’s growth rate by 1 percent this year and that they expect the growth rate to be 4.3 percent.

Köse said that they expect a decrease in inflation in the world this year compared to last year and that they expect the global annual inflation rate to decrease by 5.2 percent this year from 7.6 percent last year.

“The risk of stagflation is lower than in the past 8 months”

Köse stated that during the past 8 months, the central banks of major countries have increased their policy rates very quickly, and the aim of this is to ensure price stability.

Chief Economist Köse stated that in order to eliminate the risk of stagflation, it is necessary to reduce inflation, target levels, and to raise the average growth rate, and stated that the central banks are doing their best. Köse also underlined that the risk of stagflation is lower than the previous 8 months, but that the world economy still needs to be protected against many shocks.

“Reliable policies are needed”

Köse stated that the impact of the Ukrainian war on the world economy should be evaluated in two ways, and said that it is a problem to talk about the uncertainty brought about by the war and stability. He reminded that the second is the volatility in the commodity markets and the increase in food and power prices with the start of the war.

Köse said that in an environment where inflation will be high with this uncertainty for the next 6 months, policy makers should implement a policy that will provide confidence in the middle period, which will reduce the uncertainty in a very important form.