The world economy is at risk of recession, says the World Bank
The World Bank warned on Tuesday that weaker growth in all three of the world’s largest economies—the United States, Europe, and China—will push the global economy “perilously near” to a recession this year.
The World Bank, which provides loans to less developed nations for development projects, stated in an annual report that it has reduced its expectation for global growth this year by almost half, to just 1.7%, from its earlier projection of 3%. If that prediction comes true, it will rank behind only the severe recessions brought on by the 2008 global financial crisis and the pandemic in 2020 as the worst yearly expansion in the past three decades.
Despite the World Bank’s forecast that the US economy will grow by just 0.5% this year, the country’s firms and consumers will undoubtedly face additional challenges as a result of the global downturn in addition to high costs and higher borrowing costs.
If COVID continues to rise or the conflict in Ukraine gets worse, the United States is still at risk of experiencing additional supply chain disruptions. Additionally, a weakened Chinese economy will probably hurt Europe, a long-time significant exporter to China.
The World Bank research also mentioned how higher interest rates will draw capital from poorer nations, depriving them of essential domestic investment. Developed economies like the United States and Europe are examples of this. The paper added that at a time when Russia’s war of Ukraine has kept global food prices high, these high borrowing rates will hinder growth in wealthy nations.
Poorer nations in regions like sub-Saharan Africa, where the World Bank projects that per capita income will grow just 1.2% in 2023 and 2024, will be particularly severely hit by the effects of a global recession. Because of its slow growth, poverty levels may increase.
weakness in growth and business investment will aggravate the already disastrous reversals in education, health, poverty, and infrastructure, as well as the mounting pressures from climate change.
The report comes after Kristina Georgieva, the president of the international financing organization, made a similarly pessimistic prediction a week earlier. On CBS’ “Face the Nation,” Georgieva predicted that this year will see recessions in one-third of the world’s economies.
This year will be harder than the one we leave behind for the majority of the global economy, according to Georgieva.
“Why? because all three of the world’s major economies—the US, EU, and China—are slowing down at the same time. The European Union’s economy is predicted by the World Bank to increase by zero percent in 2019 following a 3.3% growth in 2022. It predicts that China would expand by 4.3%, which is over a percentage point slower than its prior prediction and around half the rate that Beijing achieved in 2021.
The bank anticipates that developing nations would do better, with a growth of 3.4% this year, the same as in 2022, though still only expanding at a rate that is around half that of 2021. Brazil’s growth is predicted to decline from 3 percent last year to 0.8% in 2023.
It predicts that Pakistan’s economy would grow by only 2% this year, or one-third less quickly than in 2017. Other economists have expressed similarly pessimistic predictions, albeit most of them are not quite as terrible. JPMorgan economists forecast sluggish growth this year for developed economies and the world at large, but they do not foresee a global recession. The bank projected last month that decreasing inflation will increase consumer spending and drive growth both domestically and abroad.