Malpass said this in his Opening address at the ongoing
Spring Meetings 2023 Media Call, a copy of which was obtained by the News
Agency of Nigeria (NAN) on Monday.
He said several factors were weighing on the second-half
outlook.
“Oil prices have jumped back above 80 dollars/barrel. The
recent banking sector stress dampens activities and inflation pressures
persist.
Malpass said the U.S. month-over-month core inflation had
been rising over the last five months, saying there would be new data on
Wednesday.
“If we look at developing countries excluding China, we
expect a slowdown to about 3.1 per cent in 2023 from 4.1 per cent in 2022.
“The concern in our recent reports is that slow growth will
persist for years for many developing countries, increasing the fiscal stress
and debt problems.
“It is a combination of weak investment, higher interest
rates, and relatively weak growth in the advanced economies.’’
He said the danger was acute due to inflation, currency
depreciation, rising debt service costs, and the collapse of international
reserves.
Malpass said the diversion of natural gas to Europe
presented grave obstacles to developing country production of electricity,
fertiliser, and food.
“These problems are severely constraining future growth and
deepening inequality and fragility for developing countries.
“I travelled to West Africa in March, where we are working
to provide support in the face of these problems.
“Looking at the big picture, I will mention two problems,
first, the normalisation of interest rates after an artificial decade near
zero.
He said this created problems in terms of the duration
mismatch seen in the bank failures, liquidity shortages, and how to allocate
the losses.
“The duration mismatch will take time to digest. With
inflation persistent and the dollar weakening, the risk is that the losses will
be allocated to those with lower incomes, including through inflation.’’
Malpass said the second major problem was that the available
global capital was being absorbed by a narrow group of advanced economies that
have extremely high government debt levels.
“I will call them sinkholes. To make matters worse, their
populations are ageing rapidly and the peace dividend of the 1990s was used
up.’’
He said he had advocated a range of new policies that would
spur production to combat inflation and currency weakness.
“However, the likelihood is a long period of slow growth,
asset reprising, and capital moving in the wrong direction.
“Moving toward a narrow group of governments and big
corporations rather than to the small businesses and working capital that could
add to global growth.’’
Malpass said two exceptions to the slowdown included China
and India.
According to him, China’s Gross Domestic Product (GDP)
growth is rebounding to more than five per cent in 2023, with strong private
investment.
“I note the stability of China’s currency and the
countercyclical nature of its monetary policy. I was in China in December as
they ended the lockdown.
“The government is encouraging growth in services,
especially healthcare and tourism.’’
Malpass said India continued to be one of the
fastest-growing major economies in the world.
“We are looking for growth of 6.3 per cent in their FY23/24.
They will feel some effects from the global slowdown.
“I was there in February and think it will take capital
market liberalisation for India to achieve their eight per cent growth goal.’’
NAN reports that the World Bank Group/International Monetary
Fund 2023 Spring Meetings opened on Monday in Washington DCand would end on
April 16. NAN