Kathmandu. The war between the United States and Iran has sparked global concern. The price of oil has reached a record high and is approaching $100 per barrel. Stock markets around the world have also fallen sharply. Imports and exports of many countries have been affected. In this regard, the World Bank has issued a major warning.
World Bank chief Ajay Bangla has warned that things are not yet clear, but the situation will only get worse once the war ends. The damage may last long after the war ends. “An immediate and permanent ceasefire will not prevent a widespread economic slowdown,” he said. ’
Even if the ceasefire lasts, global growth could fall by 0.3 to 0.4 percentage points. If the ceasefire is broken again, the decline could widen to 1 percentage point. This will have huge implications for trade, energy markets and the financial system.
According to Banga, the pressure of inflation is also expected to increase simultaneously. Banga indicated that global inflation could rise by 200 to 300 basis points in the event of a ceasefire, and by another 0.9 percentage points if the conflict prolonged. For developing economies, the situation looks even worse. At worst, inflation could reach 6.7 percent.
Developing countries at risk
The World Bank has begun talks to provide emergency funds through crisis assistance to vulnerable countries, including island economies that depend on energy imports. However, Banga has clearly warned that governments should not get caught up in sustainable energy subsidies. This can lead to financial instability later on.
In contrast, countries that fail to diversify their energy resources risk long-term economic instability. Citing the example of Nigeria, Banga said a $20 billion refinery project there has strengthened domestic energy security and enabled exports such as jet fuel to neighbouring countries. ’
Banga stressed that the long-term solution lies in promoting alternative energy — nuclear, hydropower, geothermal — wind and solar in a big way. Without this transition, countries can switch back to traditional fossil fuels. This will increase both economic and environmental risks. –Agency
