The world is teetering on the brink of recession — the first time in more than 80 years that two global recessions have occurred within the same decade, the World Bank has warned.
In its latest report, the World Bank said global growth was “slowing sharply” and any new adverse triggers could push the world into recession.
These could include higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions.
The forecasts are contained in the World Bank’s latest Global Economic Prospects report.
The paper blamed the current downturn in growth on elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine.
The World Bank noted that some inflationary pressures started to abate as 2022 drew to a close, with lower energy and commodity prices, but warned that risks of new supply disruptions were high, and elevated core inflation may persist.
“The global economy is projected to grow by 1.7 per cent in 2023 and 2.7 per cent in 2024,” states the report.
“The sharp downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95 per cent of advanced economies and nearly 70 per cent of emerging market and developing economies.”
Growth in advanced economies is projected to slow from 2.5 per cent in 2022 to 0.5 per cent in 2023.
“Over the past two decades, slowdowns of this scale have foreshadowed a global recession,” says the report.
“In the United States, growth is forecast to fall to 0.5 per cent in 2023—1.9 percentage points below previous forecasts and the weakest performance outside of official recessions since 1970.
“In 2023, euro-area growth is expected at zero percent—a downward revision of 1.9 percentage points. In China, growth is projected at 4.3 per cent in 2023—0.9 percentage point below previous forecasts.”
The bleak outlook will be especially hard on emerging market and developing economies, the World Bank said, as they struggle with heavy debt burdens, weak currencies and income growth, and slowing business investment that is now forecast at a 3.5 per cent annual growth rate over the next two years — less than half the pace of the past two decades.
“Weakness in growth and business investment will compound the already devastating reversals in education, health, poverty and infrastructure and the increasing demands from climate change,” World Bank President David Malpass said in a statement.
The report comes as the World Bank’s board this week is expected to consider a new “evolution road map” for the institution to vastly expand its lending capacity to address climate change and other global crises.
The plan will guide negotiations with shareholders, led by the United States, for the biggest revamp in the bank’s business model since its creation at the end of World War II.
