Second recession in 3 years? The World Bank made a sharp cut in its forecast for 2023 to 1.7% growth in the global economy, compared to its previous forecast from June, which showed 3% growth. The background to the situation is the war between Russia and Ukraine alongside the consequences of COVID19, inflation and high-interest rates. All these together predict no growth at all in the European Union.
According to the updated forecast, the world economy is expected to grow this year at a rate of only 1.7%, compared to a 3% growth forecast published in June. For the next year 2024, the forecast is for growth of 2.7%
The World Bank claimed that the causes of the updated pessimistic forecast stem from the consequences of the Russian invasion of Ukraine and the continued consequences of the epidemic. However, the bank noted the effects of interest rate increases as the main challenge facing policymakers. In the report is stated that- “Given the vulnerable economic conditions, any negative development such as higher-than-expected inflation, sharp increases in interest rates, a renewed outbreak COVID or an escalation in geopolitical tensions, could push the global economy into recession.”
The World Bank also stated that if a recession does occur, it will be the first time since the 1930’s that two recessions have occurred in the same decade, this after the recession of 2020 caused by the pandemic.
The president of the World Bank, David Malpass, has stated that the slowdown will be “broad” and the growth in personal incomes in almost all regions of the world will probably be “slower than in the decade before the outbreak of COVID-19”.
In the report, it was also noted that the US, the Eurozone and China are all going through “a period of continued weakness” and this slowdown worsened the difficulties which already exist in the poorer countries. “In the last two decades, slowdowns of this magnitude preceded a global recession,” warned the bank and noted that the estimate is for a “long and sharp slowdown.”
In developed countries, growth is expected to slow down from 2.5% in 2022 to 0.5% in 2023. In the US, the forecast is for growth of 0.5% in the current year, while in the European Union, no growth is expected at all, this is compared to a previous forecast for growth of 1.9%. For China, the forecast is for growth of 4.3% this year, a decrease compared to a previous forecast of 5.2%