The World Bank said on Tuesday that global growth is expected to slow and “close to recession” in 2023, slashing its economic forecast due to high inflation, rising interest rates and the invasion of China. Russia’s Ukraine Strategy.
Economists have warned of a slowdown in the world economy as countries grapple with rising costs and central banks simultaneously raise interest rates to cool demand – financial conditions worsened amid the ongoing disruption from the war in Ukraine.
The bank’s latest Global Economic Outlook says the World Bank’s latest forecast points to a “severe, prolonged slowdown” with growth pegged at 1.7%. , almost half the rate they predicted in June.
This is one of the weakest rates seen in nearly three decades, eclipsed only by the pandemic-induced recession of 2020 and the global financial crisis of 2009.
“Given fragile economic conditions, any new adverse developments … could push the global economy into recession,” said the Washington-based development lender.
These include higher-than-expected inflation, a sudden increase in interest rates to prevent price increases, or a resurgence of the pandemic.
In advanced economies like the United States, growth is likely to slow to 0.5% in 2023 – 1.9 points lower than forecast in June.
Meanwhile, the eurozone is expected to move sideways as it faces severe energy supply disruptions and rising prices related to the Russian invasion.
China is projected to grow 4.3% this year, 0.9 points lower than the previous forecast, partly due to prolonged pandemic disruption and weakness in the real estate sector. .
The outlook is “particularly dire for many of the poorest economies, where poverty reduction has stalled,” the bank added.
World Bank President David Malpass warned: “Emerging and developing countries are facing a multi-year period of slow growth due to a heavy debt burden and weak investment.
‘Set to dig deep’
The World Bank said central banks including the US Federal Reserve raised interest rates over the past year to fight inflation, but the drag on economies “will deepen” as policy is in effect.
“The world’s three main growth drivers – the US, the euro area and China – are experiencing marked weakness, with adverse spillovers on developing economies and markets. emerging,” the bank added.
For now, inflation has picked up, fueled by support during the pandemic, supply shocks and in some cases, the currency’s devaluation against the US dollar.
Although inflation is expected to ease, it will remain above pre-pandemic levels, the bank said.
The broad-based slowdown and weak growth do not mark a recession, said Ayhan Kose, head of forecasting at the bank.
But in the short term, the bank is looking out for “the possibility of financial stress, if interest rates move higher at the global level”, he told AFP.
If this happens and inflation persists, “that could trigger a global recession,” he said.
And if financial conditions become tighter, there is likely to be more debt crises this year, he warned.
Poverty, climate challenges
Among the worst-affected regions is sub-Saharan Africa, which accounts for about 60 percent of the world’s extreme poor.
Growth in per capita income this year and next is expected to average just 1.2%, the World Bank said, “a pace that could cause poverty rates to rise, not decrease.” .
The report also outlines the challenges facing small states with populations of 1.5 million or less, which have been hit hard by the pandemic.
The bank said it typically suffers from climate disaster-related losses “on average around 5% of GDP per year”.
“As the probability of these types of disasters is higher, we need to take into account that these risks will occur more frequently in the future,” Mr. Kose stressed.
(Except for the title, this story has not been edited by NDTV staff and is published from an aggregated feed.)
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