The global economy will be dangerously close to recession this year as growth slows in all the world's leading economies - the US, Europe and China - the World Bank warned on Tuesday..
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In its annual report, the World Bank, which lends to poorer countries for development projects, said it had cut its global growth forecast this year by almost half, to just 1.7%, from a previous forecast of 3%..
If this forecast proves accurate, it would be the third weakest annual growth in the past three decades, second only to the deep recessions triggered by the 2008 global financial crisis and the coronavirus pandemic in 2020..
However, the United States can avoid a recession this year - the World Bank predicts that the US economy will grow by 0.5%. However, global economic weakness could be another hurdle for US businesses and consumers, in addition to higher prices and more expensive loan rates..
The United States also remains vulnerable to further supply chain disruptions if COVID-19 cases continue to rise or Russia's war in Ukraine escalates..
And Europe, long a major exporter to China, is likely to suffer from a weakening Chinese economy..
The World Bank report also notes that rising interest rates in developed countries such as the US and Europe will attract investment capital from poorer countries, thereby depriving them of critical domestic investment..
At the same time, the report says, high interest rates will slow growth in developed countries at a time when Russia's invasion of Ukraine supports high global food prices..
" “The outlook is particularly devastating for many of the poorest economies, where access to electricity, fertilizer, food and capital is likely to remain limited for an extended period.”.
The impact of the global downturn will hit poor countries particularly hard in regions like Africa, home to 60% of the world's poor. The World Bank forecasts that per capita income will grow by only 1.2% in 2023 and 2024, which is so slow that poverty could increase.
“Weakness in growth and business investment will exacerbate already disruptive changes in education, health care and infrastructure, as well as growing demands associated with climate change,” Malpass said.. “Tackling the magnitude of these challenges will require significantly more resources for development and global public goods.”.
Along with seeking new funding to be able to lend more to poorer countries, Malpass said the World Bank is also seeking to improve lending conditions, which will increase debt transparency, “especially for the growing proportion of poor countries that are at high risk of debt distress.”.
The report follows an equally grim forecast made a week earlier by Kristalina Georgieva, head of the International Monetary Fund.. She suggested that a third of the world will fall into recession this year..
" - Why? Because the three big economies - the US, the EU, China - are slowing down at the same time."
The World Bank predicts that the European Union economy will not grow at all next year after growing by 3.3% in 2022. He sees China's economy growing at 4.3%, nearly a percentage point lower than previously forecast and about half the pace Beijing achieved in 2021..
The Bank expects developing countries to do better, with growth of 3.4% this year, in line with growth in 2022 but still about half of 2021.
Bank forecasts Brazilian growth to slow to 0.8% in 2023, down from 3% last year. In Pakistan, according to experts, economic growth this year will be only 2%, which is one third lower than last year's pace..
Other economists have also published gloomy forecasts, although most of them are not so dire.. JPMorgan economists forecast slower growth this year in advanced economies and the world at large, but they do not expect a global recession. The bank predicted last month that slowing inflation would boost consumers' ability to spend money and boost economies in the US and elsewhere..
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As for China, the most optimistic forecast was that business and consumer activity in China could pick up as early as the first quarter of this year.. But before that happens, entrepreneurs and families will face challenges from a surge in coronavirus cases.. As a result, employers will be left without a sufficient number of healthy workers..