On Tuesday, 2023 growth forecasts were slashed by the World Bank, bringing them down to levels that would mean an economic recession in numerous countries.
This is due to the fact that the conflict between Russia and Ukraine continues, the impact of hikes by central banks intensifies and the major economic engines in the world falter.
According to the development lender, 2023 will see 1.7% growth in the global GDP, which is the slowest increase outside the recessions of 2009 and 2020 since 1993.
In June 2022, the bank published its Global Economic Prospects report in which it had forecast a 3.0% global growth in 2023.
Likewise, the global growth forecast for 2024 had been 2.9% in 2022, but it has now slashed to 2.7%.
In addition, it also said that there would be less than 2% average growth in the period from 2020 to 2024, which would be the slowest pace of growth in five years since 1960.
According to the bank, advanced economies, such as those of the eurozone and the United States, will see major slowdowns, as it slashed its forecast for both by 0.5%.
This could be an indicator of a new global recession within three years of the last one.
The bank said that the economic conditions are already very fragile and any new adverse development could drive the global economy into a recession.
These developments could include rising geopolitical tensions, a resurgence in the COVID-19 pandemic, hotter-than-expected inflation, and big interest rate hikes to dampen it.
The World Bank said that developing and emerging market economies would take the hardest hit due to the bleak outlook because they have weak income growth, depreciating currencies, and hefty debt burdens.
Plus, business investment will also slow down, as the forecast puts it at a growth rate of 3.5%, which is less than half of the rate seen in the previous two decades.
David Malpass, the President of the World Bank, said that the reversals in infrastructure, poverty, health, and education are already damaging, as are the rising demands from climate change.
However, he added that it would get worse due to weakness in business investment and growth.
2022 saw the growth in China drop to 2.7%, which is the second slowest since the 1970s, as investment, production, and consumption all took a hit due to drought, turmoil in the property market, and its zero-COVID policy.
The World Bank report said that China’s economy was likely to see a rebound this year to 4.3%, but this is still lower than June’s forecast because of the falling external demand and surging COVID cases.
It was also noted that inflationary pressures had begun coming down at the end of 2022, as commodity and energy prices fell, but also warned that there could still be supply disruptions and core inflation may remain elevated.
This could drive central banks to continue hiking interest rates, which would only make the global slowdown worse.