‘Perilously close’ to recession: World Bank cuts global growth for 2023 to 1.7%

The global economy will come “dangerously close” to recession this year, due to weak growth in all of the world’s top economies – the United States, Europe and China – the World Bank warned on Tuesday.

The World Bank, which lends money to poor countries for development projects, said in an annual report that it cut its forecast for global growth by nearly half to just 1.7 percent this year, down from a previous forecast of 3 percent.

If that forecast proves accurate, it would be the third-weakest annual expansion in three decades, behind only the 2008 global financial crisis and the deep recession resulting from the pandemic in 2020.

Although the United States may avoid recession this year – the World Bank predicts the US economy will achieve 0.5 percent growth – global weakness poses another hurdle for US businesses and consumers on top of higher prices and more expensive lending rates. Will generate ,

The United States also remains vulnerable to further supply chain disruptions if COVID continues to escalate or the war in Ukraine worsens.

And Europe, which has long been a major exporter to China, will likely suffer from a weak Chinese economy.

The World Bank report also states that rising interest rates in developed economies such as the United States and Europe will attract investment capital from poorer countries, depriving them of significant domestic investment.

At the same time, the report said, those higher interest rates will slow growth in developed countries at a time when Russia’s invasion of Ukraine has kept world food prices high.

The global recession will particularly affect poor countries like Saharan Africa, where the World Bank estimates that per capita income will grow by only 1.2 percent in 2023 and 2024. This is such a slow pace that the poverty rate may increase.

“The weakness in growth and business investment will add to the already devastating reversals in education, health, poverty and infrastructure, and the growing demands from climate change,” said David Malpass, World Bank President.

The report follows a similarly gloomy forecast a week earlier from Kristina Georgieva, the head of the global lending agency, the International Monetary Fund. Georgieva predicted on CBS’s “Face the Nation” that a third of the world would be hit by a recession this year.

“For most of the world’s economies, this is going to be a tough year, tougher than the year we just left behind,” Georgieva said. “Why? Because the three big economies – the US, the European Union, China – are slowing down all at once.”

The World Bank estimates that after expanding 3.3 percent in 2022, the EU economy will not grow at all next year. It expects China to grow by 4.3 percent, about a percentage point lower than previously forecast, and about half the pace. that Beijing posted in 2021.

The bank expects developing countries to do better this year, growing by 3.4 percent this year, the same as in 2022, though still at about half the pace of 2021. It forecasts Brazil’s growth rate to slow to 0.8 percent in 2023, down from 3 percent in the past. The year.

In Pakistan, it expects the economy to expand by just 2 percent this year, one-third of last year’s pace.

Other economists have also issued bleak outlooks, though most of them are not as dire. JPMorgan economists are predicting slower growth this year for advanced economies and the world as a whole, but they do not expect a global recession.

Last month, the bank predicted that slower inflation would boost consumers’ spending ability and power growth in the United States and elsewhere.

The JP Morgan report said, “The global expansion will turn in 2023 but not break.”

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