The World Bank warns that the global economy could slip into recession as growth slows sharply and economic conditions remain fragile. It said in its latest Global Economic Prospects report that growth will only be 1.7% in 2023, which is much lower than the previous forecast of 3%. For 2024, it could be 2.7%.
"The sharp decline in growth is expected to be widespread, with forecasts in 2023 revised down for 95% of advanced economies and nearly 70% of emerging market and developing economies," the report said.
Persistent inflation, high interest rates, declining investment and the tense geopolitical situation in Ukraine are the drivers of the sharp slowdown. The world bank noted that this will be the first time in more than 80 years that two global recessions will occur within the same decade.
Growth in advanced economies is expected to fall to 0.5% in 2023, down from a previous estimate of 2.5%. The US economy is also projected to grow by just 0.5% this year. Meanwhile, the eurozone is forecast to grow by 0% and China is estimated to grow by 4.3%.
World Bank Group president David Malpass warned that the crisis is intensifying, stressing that "emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment as global capital is absorbed by advanced economies faced with extremely high government debt levels and rising interest rates."
The World Bank also sees risks to core inflation affecting the outlook as persistently high levels could lead to increased tightening by central banks after a year of synchronised and unprecedented price hikes.
