The World Bank has issued a stark warning regarding the increasing risk of stagflation in developing economies. This economic condition, marked by a combination of slow economic growth and persistently high inflation, poses a significant threat to global stability and prosperity.

Key Factors Contributing to Stagflation Risk

• Rising Interest Rates: Central banks around the world are raising interest rates to combat inflation, which can slow down economic activity.
• Supply Chain Disruptions: Ongoing disruptions to global supply chains continue to put upward pressure on prices.
• Geopolitical Instability: The war in Ukraine and other geopolitical tensions are exacerbating economic uncertainty.

World Bank Recommendations

The World Bank is urging policymakers in developing economies to take proactive measures to address the risk of stagflation. These measures include:

• Strengthening Fiscal Policy: Implementing responsible fiscal policies to manage debt and promote sustainable growth.
• Improving Supply Chains: Investing in infrastructure and logistics to improve the efficiency of supply chains.
• Protecting Vulnerable Populations: Providing targeted support to vulnerable populations to mitigate the impact of rising prices.

The World Bank emphasizes that decisive action is needed to prevent stagflation from derailing economic progress in developing economies and undermining global stability.