The World Bank on Tuesday cut its growth forecasts for 2023 to levels teetering on the brink of recession for many countries, as the impact of central bank rate hikes deepens, Russia’s war in Ukraine continues and the world’s main economic engines sputter.
The development lender said it expects global GDP to grow by 1.7% in 2023, the slowest pace outside of recessions in 2009 and 2020 since 1993. In its previous Global Economic Prospects report of June 2022, the bank forecast global growth in 2023 at the level of 3.0%.
It forecasts that global growth will accelerate to 2.7% in 2024 – below the 2.9% estimate for 2022 – and average growth over the period 2020-2024 should be below 2%, the slowest five-year pace since 1960.
The bank said a major slowdown in advanced economies, including a sharp cut in its forecast to 0.5% for the United States and stagnant GDP in the euro zone, could herald another global recession less than three years after the last one.
the bank said in a statement attached to report”Given fragile economic conditions, any new adverse developments – such as higher-than-expected inflation, a sudden increase in interest rates to contain it, a resumption of the COVID-19 pandemic or escalating geopolitical tensions – could push the global economy into recession”.
The bleak outlook will be particularly hard on emerging markets and developing economies, the World Bank said, as they grapple with heavy debt burdens, weak currencies and income growth and slowing business investment, now estimated at 3.5% annual growth for the full year. the next two years—less than half the pace of the past two decades.
World Bank President David Malpass said in a statement “Weak growth and business investment will bring about already devastating upheavals in education, health, poverty and infrastructure, and increasing demands from climate change”.
China’s growth in 2022 fell to 2.7%, the second-slowest pace since the mid-1970s after 2020, as zero COVID-19 restrictions, property market turmoil and drought hit consumption, production and investment, according to a World Bank report. It forecast a 4.3% recovery for 2023, but that is 0.9 percentage points below the June forecast due to the severity of the COVID disruption and weakening external demand.
The World Bank noted that some inflationary pressures had begun to ease as we approach the end of 2022 with lower energy and commodity prices, but warned that risks of new supply disruptions were high and elevated core inflation could persist. That could cause central banks to respond by raising key rates by more than currently expected, exacerbating the global slowdown, he added.
The bank called for increased support from the international community to help low-income countries deal with food and energy shocks, people displaced by conflict and the growing risk of debt crises. It said new concessional financing and grants, along with leveraged private capital and domestic resources, are needed to help increase investment in climate adaptation, human capital and health, the report said.
The news comes as the World Bank’s board is expected this week to consider a new “evolution roadmap” for the institution to significantly expand its lending capacity to address climate change and other global crises. The plan will lead to negotiations with shareholders led by the United States on the biggest overhaul of the bank’s business model since its inception at the end of World War II.
By: Vaishali Verma
