The World Bank on Tuesday warned of a recession in 2023 and said a sharp, long-lasting slowdown is expected to hit developing countries hard. It said global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine.
“Given fragile economic conditions, any new adverse development — such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions — could push the global economy into recession,” the World Bank said in its latest Global Economic Prospects report.
This would mark the first time in more than 80 years that two global recessions have occurred within the same decade, the institution said.
According to the report, the global economy is projected to grow by 1.7 per cent in 2023 and 2.7 per cent in 2024.
World Bank Group President David Malpass said the crisis facing development is intensifying and emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment.
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, the report said.
In the US, 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 points below previous forecasts.
Excluding China, growth in emerging markets and developing economies is expected to decelerate from 3.8 per cent in 2022 to 2.7 per cent in 2023, reflecting significantly weaker external demand compounded by high inflation, currency depreciation, tighter financing conditions, and other domestic headwinds.
By the end of 2024, GDP levels in emerging and developing economies will be roughly 6 per cent below levels expected before the pandemic, the World Bank said.