Global Economic Prospect: GLOBAL STAGFLATION

WASHINGTON, July 29, 2022 – Some additional 2 million people will benefit from a second Global inflation has risen sharply from its lows in mid-2020, on rebounding global demand, supply bottlenecks,
and soaring food and energy prices, especially since the Russian Federation’s invasion of Ukraine. Markets expect inflation to peak in mid-2022 and then decline, but to remain elevated even after these shocks subside and
monetary policies are tightened further. Global growth has been moving in the opposite direction: it has declined sharply since the beginning of the year and, for the remainder of this decade, is expected to remain below the
average of the 2010s. In light of these developments, the risk of stagflation—a combination of high inflation and sluggish growth—has risen. The recovery from the stagflation of the 1970s required steep increases in
interest rates by major advanced-economy central banks to quell inflation, which triggered a global recession and a string of financial crises in emerging market and developing economies (EMDEs). If current
stagflationary pressures intensify, EMDEs would likely face severe challenges again because of their less well anchored inflation expectations, elevated financial vulnerabilities, and weakening growth fundamentals. This
makes it urgent for EMDEs to shore up their fiscal and external buffers, strengthen their monetary policy frameworks, and implement reforms to reinvigorate growth. Phase of the West Africa regional Food Systems Resilience Program (FSRP-2) approved today for a total amount of $315 million in International Development Association (IDA*) financing. FSRP-2 will support Chad, Ghana and Sierra Leone to increase their preparedness against food insecurity and to improve the resilience of their food systems. This comes at a moment where it is projected that approximately 38.3 million people in West Africa are projected to be in food security crisis.

Global Economic Prospects — June 2022 (