The World Bank has released its latest projections for global economic growth and warned that the world economy could enter a recession in 2023. The bank has revised its previous projections and expects global growth to slow down to 2.5% this year, down from the 2.9% growth forecasted in October 2022. The bank also warned that the risk of a recession is now higher than it has been in the past few years due to a number of factors, including rising interest rates, trade tensions, and political uncertainty.
The World Bank cites the ongoing trade tensions between the United States and China as a major cause of the global economic slowdown, as well as rising interest rates, which have made borrowing more expensive for businesses and consumers and have slowed down investment and spending. The World Bank pointed to political uncertainty in many countries around the world as another factor contributing to the weaker economic outlook.
It was also highlighted that the projections were uncertain due to the ongoing COVID-19 pandemic, which has hit different countries and sectors differently. Many countries are still experiencing high levels of uncertainty due to the possibility of a return of restrictions and lockdowns as well as the slow pace of vaccinations.
The World Bank’s projections are in line with other forecasts from international organizations. The International Monetary Fund, for example, recently lowered its global growth forecast for 2023 to 3.5%, down from 4.2% in October 2022.
The report also highlighted that the economic recovery is uneven across the globe. Developing countries in East Asia, Latin America, and the Caribbean are expected to grow by 4.5%, 3.5%, and 1.5%, respectively, in 2023. The growth forecast for high-income countries is just 1.1%.
The World Bank’s projections signal a challenging year ahead for the global economy, with the risk of a recession now higher than it has been in recent years. The World Bank has advised countries to take measures such as implementing structural reforms, investing in infrastructure, and promoting more inclusive growth. These measures might mitigate the risks of a recession as the global economy tries to navigate a challenging economic landscape characterized by rising trade tensions, interest rates, and political uncertainty.