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The World Bank cut its 2023 growth projections to levels not seen in three decades, as the impact of central bank interest rate hikes intensifies, Russia’s war in Ukraine continues and the main economic drivers of the world are in check.
Global recession? In its annual report, the World Bank, WB, a lender to the poorest countries for development projects, said it had cut its global growth forecast for this year by almost half, to just 1.7%, from its previous forecast for the year. 3%.
The World Bank warned that the world economy will be “dangerously close” to recession this year, due to lower growth in major world economies such as the United States, Europe and China.
If fulfilled, it would be the third weakest annual expansion in three decades, trailing only the recessions stemming from the 2008 global financial crisis and the 2020 coronavirus pandemic.
Although the US could avoid a recession this year, the World Bank expects the US economy to post 0.5% growth, and global weakness is likely to spell another headwind for US businesses and consumers as well such as rising prices and higher interest rates.
The United States is still vulnerable to further supply chain disruptions if Covid-19 continues to be affected or Russia’s war in Ukraine escalates. Meanwhile Europe, long a major exporter to China, is likely to suffer from the downturn in China.
The report notes that rising interest rates in developed economies such as the United States and Europe will pull investment capital out of poorer countries, thus depriving them of crucial domestic investment, while those high interest rates will slow growth in developing countries. developed at a time when the Russian invasion of Ukraine is keeping world food prices high.
“The Russian invasion of Ukraine has added important new costs,” said World Bank President David Malpass. “The outlook is particularly devastating for many of the poorest economies, where poverty reduction is already at a standstill and access to electricity, fertilizer, food and capital is likely to remain limited for an extended period.” he added.
The World Bank expects the European Union economy to grow flat next year, after expanding by 3.3% in 2022. It expects China to grow by 4.3%, almost a percentage point less than previously forecast and about half the pace that Beijing posted in 2021.
A global recession would especially hit the poorest countries in areas like Saharan Africa, where 60% of the world’s poor live. The World Bank forecasts that per capita income will grow only 1.2% in 2023 and 2024, a rate so lukewarm that poverty rates could rise.
“Weak growth and business investment will exacerbate the already devastating setbacks in education, health, poverty and infrastructure, as well as the growing demands stemming from climate change,” Malpass said, adding that “addressing the magnitude of these challenges will require many more resources for development and global public goods”.
with PA
