The World Bank cut its 2023 growth forecasts on Tuesday to levels on the brink of recession for many countries, as the impact of central bank hikes in interest rates intensifies, Russia’s war on Ukraine continues and the world’s main economic engines stumble.
The development bank said it now expected global GDP growth of 1.7% in 2023 — the slowest pace apart from the 2009 and 2020 recessions in nearly three decades.
In its previous Global Economic Outlook report in June 2022, the bank had forecast global growth of 3.0% in 2023.
The bank said that major downturns in advanced economies, including sharp cuts to its forecast to 0.5% for both the United States and the euro zone, could portend a new global recession less than three years after the last one.
“Given the fragility of economic conditions, any further adverse development – such as higher-than-expected inflation, sharp increases in interest rates to contain it, a resurgence of the Covid-19 pandemic or an escalation of geopolitical tensions – could push the global economy into recession,” the bank said in a statement accompanying the report.
The bleak outlook will be especially difficult for emerging and developing economies, the World Bank said, as they struggle with heavy debt burdens, weak currencies and income growth and a slowdown in business investment, which is now forecast at a growth rate 3.5% annually over the next two years—less than half the pace of the past two decades.
“Weakness in growth and business investment will compound already devastating reversals in education, health, poverty and infrastructure and the increasing demands of climate change,” World Bank President David Malpass said in a statement.
China’s growth in 2022 fell to 2.7%, its second slowest pace since the mid-1970s after 2020, as restrictions under the Covid zero policy, housing market turmoil and drought hit consumption, production and investment, said the World Bank report.
The bank forecasts a recovery to 4.3% in 2023, but this is 0.9 percentage points lower than the June forecast due to the severity of the problems caused by Covid and weakening external demand.
The World Bank noted that some inflationary pressures had begun to ease as 2022 drew to a close, with lower energy and commodity prices, but warned that risks of further supply disruptions are high, and that high inflation could persist. This could cause central banks to respond by raising interest rates more than currently expected, compounding the global slowdown, he added.
Source: CNN Brasil
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