The world bank has cut 2023 growth forecasts, reflecting the growing risk of recession for a number of countries as the impact of central bank rate hikes deepens, whilst Russia’s war in Ukraine continues and energy prices remain high.
The bank forecast global GDP growth of 1.7% in 2023, the worst rate since 1993 outside of the recessions of 2009 and 2020. In its previous Worldwide Economic Prospects report, published in June 2022, the bank had projected a global growth rate of 3.0% for 2023.
It predicted that global growth would increase to 2.7% in 2024, below the 2.9% estimate for 2022, and that the average growth rate for the decade 2020-2024 would be less than 2%, the worst five-year pace since 1960.
Significant slowdowns in advanced countries, particularly severe cutbacks to its prediction of 0.5% for the United States and flat GDP for the euro zone, might portend a second global recession less than three years after the last one, according to the bank.
“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 bank said in an accompanying statement.
Emerging market and developing economies will be hit particularly hard by the bleak outlook, according to the World Bank, as they struggle with heavy debt loads, weak currencies and income growth, and slowing business investment, which is now expected to grow at a 3.5% annual rate over the next two years — less than half the rate of the past two decades.
World Bank President David Malpass stated in a statement, “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,”