On January 10, 2023, the World Bank released its “Global Economic Outlook” report, stating that the outlook for the global economy and future economic conditions is bleak. According to the report, growth projections for 2023 were lowered across the board, with the global economy projected to grow 1.7% in 2023 and 2.7% in 2024. The World Bank also cited a number of adverse factors that could push the global economy into a severe recession.
The World Bank report calls for action on climate change, increased investment to offset adverse economic shocks
The World Bank, a financial institution with 174 member countries,released its World Economic Outlook reporton Tuesday. The report assumes that “a sharp and prolonged economic slowdown will hit developing countries hard.” The World Bank cited a number of problems plaguing the global economy, including the Covid-19 pandemic and “escalating geopolitical tensions,” as reasons for the global recession. It also cites interest rate hikes by central banks and “higher-than-expected inflation” as factors in the “unfavorable developments.”
The World Bank’sreportfurther details that inflation had fallen to some extent by the end of 2022. It also notes that soaring commodity and energy prices have subsided for the time being. However, the World Bank warns that inflation is still likely to persist in the global economy and that supply disruptions could result from adversities such as the Covid 19 pandemic and the Ukraine-Russia war in Europe. If inflation persists, the World Bank warns that bank base rates may continue to rise to contain inflationary pressures.
“Growth in advanced economies is projected to slow from 2.5% in 2022 to 0.5% in 2023. For the past two decades, a slowdown of this magnitude has foreshadowed a global recession,” the World Bank’s World Economic Outlook report elaborates. In the United States, growth is projected to slow to 0.5% in 2023. This is 1.9 percentage points below previous forecasts and the weakest performance outside of an official recession since 1970. In the euro area, growth is expected to be 0% in 2023, a downward revision of 1.9 percentage points. In China, growth is projected at 4.3% in 2023, 0.9 percentage points below the previous forecast.”
The summary of the report concludes that the global economy can be helped by “improving long-term growth prospects by strengthening resilience to climate change.” The World Bank argues that policymakers need to “address climate change and help those affected by crisis and hunger.” Emerging and developing economies need to “significantly increase investment” to “offset the long-term damage from the adverse shocks of the past three years,” according to the World Bank report.
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