Recession News: 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.
In an annual report, the World Bank, which lends money to poor countries for development projects, said it cut its forecast for global growth by nearly half to just 1.7% this year, down from its previous forecast of 3%. Was. If this forecast proves accurate, it would be the third weakest annual expansion in three decades, behind only the global financial crisis of 2008 and the deep recession resulting from the coronavirus pandemic in 2020.
Although the United States may avoid recession this year – the World Bank predicts the US economy will achieve 0.5% 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-19 continues to escalate or Russia’s war in Ukraine worsens.
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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.
“Russia’s invasion of Ukraine has added huge new costs,” World Bank President David Malpass told reporters. “The outlook is particularly disastrous for many of the poorest economies where poverty reduction is already stalled and access to electricity, fertiliser, food and capital is likely to be restricted for a long time.”
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The impact of the global recession will be particularly hard on poor countries in regions such as Saharan Africa, which is home to 60% of the world’s poor. The World Bank estimates that per capita income will grow by only 1.2% in 2023 and 2024, a pace so slow that poverty rates could rise.
“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,” Malpass said. “Addressing the scale of these challenges will require more resources for development and global public goods.”
Malpass said that as well as seeking new funding so it can lend more to poor countries, the World Bank is seeking, among other things, to reform its loan terms that would enhance loan transparency, “special High risk of debt crisis for a growing share of economically poor countries.”
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% in 2022, the EU economy will not grow at all next year. It expects China to grow 4.3%, about a percentage point lower than the earlier forecast and about half the pace posted by Beijing. In 2021.
The bank expects developing countries to do better this year at a rate of 3.4%, which is similar to 2022, though still about half the pace of 2021. It forecasts Brazil’s growth rate to slow to 0.8% in 2023, down from 3% last year. In Pakistan, it expects the economy to expand by just 2% this year, a 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.”