World Bank forecasts worst stagflation since 1970s amid Ukraine war

April 26 (UPI) -- The World Bank warned Tuesday that inflated food and energy prices are here to stay, and that the war in Ukraine could put the world economy on a path of slow growth and high inflation for the next three years.

The dismal analysis predicts the worst stagflation, combining high prices, high unemployment with low demand, in 50 years.

"Overall, this amounts to the largest commodity shock we've experienced since the 1970s. As was the case then, the shock is being aggravated by a surge in restrictions in trade of food, fuel and fertilizers," Indermit Gill, the World Bank's vice president for equitable growth, finance and institutions, said in a press release.

The forecast referenced the largest jump in oil prices since the 1973 energy crisis and said energy prices could skyrocket more than 50% this year, pushing up bills for households and businesses.

"We're particularly worried about the poorest households since they spend a larger share of income on food and energy, so they're particularly vulnerable to this price spike," Peter Nagle, a co-author of the report, told the BBC.

The price of natural gas in Europe is expected to double, as Russia produces about 11% of the world's oil. The United States and other countries have banned Russian oil and gas imports since its invasion of Ukraine in February.

"Disruptions resulting from the war are expected to have a lasting negative effect," according to the report.

Food prices are also forecast to see large hikes. The cost of wheat could reach record highs and increase 42.7%, with fewer exports from Ukraine and Russia.

And the cost of fertilizer is forecast to increase 69% this year.

"The outlook for commodity markets depends heavily on the duration of the war in Ukraine and the disruption to supply chains," according to the report. "While prices generally are expected to peak in 2022, they are to remain much higher than previously forecast."