World Bank’s Latest Report on Global Economic Prospects
The World Bank has released its latest report on Global Economic Prospects, outlining a slowdown in global growth due to a variety of factors including elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine. The report warns that any additional negative developments, such as a resurgence of the COVID-19 pandemic or escalating geopolitical tensions, could push the global economy into recession, marking the first time in more than 80 years that two global recessions have occurred within the same decade.
According to the report, the global economy is projected to grow by 1.7% in 2023 and 2.7% in 2024. The downturn 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. Over the next two years, per-capita income growth in emerging market and developing economies is projected to average 2.8%, a full percentage point lower than the 2010-2019 average.
Impact on Developing Countries
The report highlights that the crisis facing development is intensifying as the global growth outlook deteriorates. 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. This will result in a weakness in growth and business investment, compounding the already-devastating reversals in education, health, poverty, and infrastructure, as well as the increasing demands from climate change. In Sub-Saharan Africa, which accounts for about 60% of the world’s extreme poor, growth in per capita income over 2023-24 is expected to average just 1.2%, a rate that could cause poverty rates to rise, not fall.
Growth in advanced economies is projected to slow from 2.5% in 2022 to 0.5% in 2023. Over the past two decades, slowdowns of this scale have foreshadowed a global recession. In the United States, growth is forecast to fall to 0.5% in 2023, the weakest performance outside of official recessions since 1970. In 2023, Euro-area growth is expected at zero percent, and in China, growth is projected at 4.3% in 2023.
Emerging Market and Developing Economies
Excluding China, growth in emerging market and developing economies is expected to decelerate from 3.8% in 2022 to 2.7% in 2023, reflecting significantly weaker external demand compounded by high inflation, currency depreciation, tighter financing conditions, and other domestic headwinds. By the end of 2024, GDP levels in emerging and developing economies will be roughly 6% below levels expected before the pandemic. Although global inflation is expected to moderate, it will remain above pre-pandemic levels.
The report also offers a comprehensive assessment of the medium-term outlook for investment growth in emerging market and developing economies. Over the 2022-2024 period, gross investment in these economies is likely to grow by about 3.5% on average—less than half the rate that prevailed in the previous two decades. The report suggests a menu of options for policymakers to accelerate investment growth, such as establishing sound fiscal and monetary policy frameworks and undertaking comprehensive reforms in the investment climate.
Category: Reports & Indexes Current Affairs
Topics: economic outlook • emerging markets • Global Economic Prospects • Global Economy • Gross Domestic Product (GDP) • World Bank
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