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Global economy ‘perilously close’ to a recession: World Bank | Economy News


Global economy will be “very close” to recession this year, leading to weaker growth in all world’s top economies – US, Europe and China – World Bank warns on Tuesday.

In an annual report, the World Bank, which lends money to poor countries to undertake development projects, said it had cut its global growth forecast for this year by almost half, to just under half. to 1.7%, compared with the previous forecast of 3%. If that forecast proves to be correct, it would be the third weakest annual expansion in 30 years, behind only the deep recessions caused by the global financial crisis in 2008 and the coronavirus pandemic in 2008. 2020.

While the US may be able to avoid a recession this year – the World Bank has predicted the US economy will grow by 0.5% – the global weakness is likely to trigger a bout of recession. other headwinds for U.S. businesses and consumers, besides high prices and more expensive borrowing rates. The United States will also be vulnerable to further supply chain disruption if COVID-19 continues to increase or Russia’s war in Ukraine worsens.

And Europe, which has long been a major exporter to China, is likely to be hit by a weaker Chinese economy.

The World Bank report also notes that interest rate increase in advanced economies such as the United States and Europe will attract investment capital from poorer countries, thereby depriving them of important domestic investment. At the same time, the report said, those high interest rates will slow growth in developed countries at a time when Russia Invades Ukraine world food prices are always high.

World Bank President David Malpass said in a call with reporters: “Russia’s invasion of Ukraine has added new costs. The outlook is particularly dire for many of the poorest economies, where poverty reduction has stalled and access to electricity, fertilizers, food and capital is likely to be limited for a long time. .”

The effects of the global recession will be especially severe for poorer countries in areas like sub-Saharan Africa, home to 60% of the world’s poor. The World Bank has predicted that per capita income will increase by just 1.2% between 2023 and 2024, a pace so slow that poverty rates could rise.

Chadian economy
For much of the world, this will be a ‘tough year’ [File: Xaume Olleros/Bloomberg]

“The weakness in business growth and investment will combine with already devastating reversals in education, health, poverty and infrastructure as well as growing demand driven by climate change,” Malpass said. climate change. “Addressing the scale of these challenges will require significantly more resources for development and global public goods.”

Along with finding new sources of financing so that it can lend more to poor countries, the World Bank will seek to improve loan terms to increase the transparency of debts, Malpass said. especially given the growing proportion of poor countries at high risk of default”.

The big three slow down

The report followed a similarly dismal forecast a week earlier from Kristina Georgieva, head of the International Monetary Fund, the global lending body. Georgieva estimates on the American CBS news network, Face the Nation, that a third of the world will fall into a recession this year.

“For most of the world economy, this is going to be a tough year, harder than the year we left behind,” Georgieva said. “Why? Because the three major economies – the US, the EU, China – are all decelerating at the same time.”

The World Bank has predicted that the European Union’s economy will not grow at all next year, having grown by 3.3% in 2022. The bank predicts China will grow 4.5%, 3%, nearly 1 percentage point lower than the previous forecast and about half the rate Beijing put forward in 2021.

The bank expects developing countries to outperform, growing 3.4% this year, the same pace as 2022, although still at half the pace of 2021. The bank forecasts Brazil’s growth rate will slow to 0.8% in 2023, down from 3% last year. In Pakistan, the economy is expected to grow just 2% this year, a third of last year’s pace.

Other economists have also offered bleak prospects, though most of them are not so dire. Economists at JPMorgan are predicting slow growth this year for advanced economies and the world as a whole, but they don’t expect a global recession to happen. Last month, the bank predicted that slowing inflation would boost consumer spending and spur growth in the US and elsewhere.

The JPMorgan report said: “Global expansion will be bent but not broken in 2023.

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