The World Bank warned on Tuesday that the global economy will come dangerously close to recession this year, led by weak growth in all of the world’s major economies – the United States, Europe and China.
In an annual report, the World Bank, which lends money to poor countries for development projects, said it cut its forecast for global growth this year by about half, to just 1.7%, from its previous forecast of 3%. If those projections prove accurate, it would be the third-weakest annual expansion in three decades, after the deep recession triggered by the global financial crisis of 2008 and the pandemic in 2020.
Although the United States may avoid a recession this year — the World Bank expects the US economy to grow by 0.5% — global weakness is likely to be another headwind for America’s businesses and consumers, in addition to higher prices and more expensive borrowing rates. The United States also remains vulnerable to more supply chain disruptions if the coronavirus continues to spike or the war in Ukraine worsens.
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Europe, long a major exporter to China, is likely to suffer from a weaker Chinese economy.
The World Bank report also indicated that high interest rates in advanced economies such as the United States and Europe will attract investment capital from poor countries, thus depriving them of important domestic investment. At the same time, the report said, these high interest rates will slow growth in developed countries at a time when Russia’s invasion of Ukraine has kept global food prices high.
The impact of the global downturn will hit poorer countries in regions such as sub-Saharan Africa, where the World Bank expects per capita income to grow by just 1.2% in 2023 and 2024. This is a tepid pace at which poverty rates could rise.
“Weak growth and business investment will compound the already devastating setbacks in education, health, poverty, infrastructure and the growing demands of climate change,” said David Malpass, World Bank President.
The report follows similarly bleak forecasts a week ago from Kristina Georgieva, head of the International Monetary Fund, the global lending agency. Georgieva estimated on CBS’s “Face the Nation” that a third of the world would fall into recession this year.
“For most of the global economy, this is going to be a tough year, even tougher than the year we are leaving behind,” Georgieva said. “Why? Because the three largest economies — the United States, the European Union, and China — are all slowing down simultaneously.”
The World Bank projects that the EU economy will not grow at all next year after expanding 3.3% in 2022. It expects China to grow 4.3%, about a percentage point lower than it previously forecast, and about half the pace of Beijing’s growth. Published in 2021.
The bank expects developing countries to do better, growing 3.4% this year, as they did in 2022, although still about half the pace in 2021. The bank expects Brazil’s growth to slow to 0.8% in 2023, down from 3%. % last year. In Pakistan, you expect the economy to expand just 2% this year, a third of last year’s pace.
Other economists have also issued grim predictions, though most aren’t entirely dire. JPMorgan economists expect slow growth this year for advanced economies and the world as a whole, but they don’t expect a global recession. Last month, the bank predicted that slowing inflation would boost consumers’ spending power and boost growth in the United States and elsewhere.
“Global expansion will turn into a bent but not broken 2023,” the JPMorgan report said.
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