The World Bank on Tuesday warned that the global economy is entering a "pronounced slowdown" amid fresh threats of COVID-19 variants and a rise in inflation, forecasting growth this year to slow to 4.1 percent, down 0.2 percentage point from its estimate in June.
The Japanese economy, however, is expected to grow at a rate 0.3 point higher than the earlier projection, reaching 2.9 percent in 2022 on the back of a likely pick-up in economic activity thanks to the rollout of coronavirus vaccines, the Washington-based institution said.
"As the world enters the third year of the COVID-19 crisis, economic developments have been both encouraging and troubling, clouded by many risks and considerable uncertainty," World Bank President David Malpass said in the semiannual Global Economic Prospects report.
The projected 4.1 percent expansion of global economic output in 2022 compares with an estimated 5.5 percent growth the previous year, marking the sharpest slowdown after an initial rebound from a global recession, according to the report.
Global growth is expected to decelerate further to 3.2 percent in 2023 as pent-up demand following pandemic-related restrictions will dissipate, with fiscal and monetary support continuing to be unwound worldwide.
Various downside risks cloud the outlook, including the continued spread of the coronavirus amid unequal distribution of vaccines across countries, which the report said "opens the door to new concerning strains," as exemplified by the highly contagious Omicron variant first detected in November.
Continued supply-chain difficulties, stemming from the return of strong demand amid global economic recovery, could cause additional disruptions to international trade and contribute to further inflation surprises, according to the report.
In Japan, economic activity remained subdued through 2021, but it is likely to have picked up toward the end of the year as high COVID-19 vaccination rates led to the easing of pandemic-control measures, it said.
After an estimated 1.7 percent growth in 2021, the real gross domestic product of the world's third-largest economy is set to show a rise of 2.9 percent in 2022 before slowing to 1.2 percent in 2023.
The U.S. output is estimated to have expanded by 5.6 percent in 2021, 1.2 points below the previous forecast due to COVID-19 outbreaks, mounting supply shortages and rising energy prices, as well as a fading boost from fiscal support.
The growth outlook for this year was also revised down by 0.5 point to 3.7 percent, partly reflecting the Omicron-driven resurgence of the pandemic.
While the Federal Reserve is eyeing three potential interest rate hikes this year to combat inflation, the report warned that "tenacious inflation and an even faster tightening of monetary policy" could lead to weaker-than-expected growth.
The eurozone economy is anticipated to grow 4.2 percent and 2.1 percent in 2022 and 2023, respectively, both figures revised downward from the June projection.
Growth in China is also forecast to be lower than earlier projected, with the latest figure of 5.1 percent for 2022 having been revised down by 0.3 point amid the lingering effects of the pandemic and tighter regulations in the real estate sector, the report said. Growth in the following year is estimated to be 5.3 percent, unchanged from June.
Output in emerging-market and developing economies overall will falter to 4.6 percent in 2022 from 6.3 percent in 2021, owing to slower vaccination progress and more muted policy support.
A notable deceleration in major economies, including the United States and China, will also weigh on external demand in emerging and developing economies, the report said.
Global trade volume is forecast to grow 5.8 percent this year after surging 9.5 percent in 2021.