The World Bank has cut its forecast for global growth from the projections it made in mid-2022 due to what it sees as a general deterioration in economic conditions.
The international development institution has downgraded nearly all of its forecasts for the world’s advanced economies, cutting its growth outlook for the global economy to 1.7% for 2023, it said in a statement. its latest report, Global Economic Prospects. The organization earlier predicted the global economy would grow by 3% in 2023.
The adjustment was led by a significant downward revision to its outlook for the US economy – it now projects growth of 0.5% from an earlier projection of 2.4%.
The World Bank lowered its growth outlook for China for 2023 from 5.2% to 4.3%, Japan from 1.3% to 1% and Europe and Central Asia from 1.5% to 0.1%.
“Global growth has slowed to the point where the global economy is dangerously close to falling into recession,” the World Bank said, attributing “unexpectedly rapid and synchronous” global monetary policy tightening to the sluggish growth.
The downgraded estimates would mark “the third weakest pace of growth in nearly three decades, eclipsed only by global recessions caused by the pandemic and the global financial crisis.”
The World Bank said tighter monetary policies by central banks around the world may have been necessary to bring inflation under control, but they “contributed to a significant deterioration in global financial conditions, which is considerable on the activity”.
“The United States, the eurozone and China are all going through a period of pronounced weakness, and the resulting fallout is exacerbating other headwinds facing emerging markets and developing economies,” he said. declared.
The global financial organization also adjusted its forecast for 2024 down to 2.7% from an earlier forecast of 3% growth.
China is a “key variable”
A faster-than-expected reopening of China poses great uncertainty for its economic recovery, the World Bank said in its report.
“The economic recovery [in China] may be delayed if reopening results in major outbreaks that overburden the health sector and undermine confidence,” the report said. “There is significant uncertainty about the trajectory of the pandemic and how households, businesses and policymakers in China will respond.
A pedestrian in Lujiazui financial district in Pudong in Shanghai, China on Tuesday, Jan. 3, 2023.
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World Bank President David Malpass said on CNBC’s “Closing Bell” on Tuesday that “China is a key variable and there could be an advantage for China if it pushes Covid through as quickly as it seems the make”.
“China is big enough on its own to really drive global supply and demand,” he said.
“One of the questions for the world would be what is it doing the most – if it’s primarily putting upward pressure on global demand, that’s driving up commodity prices. But that also means the Fed will rise for a longer period,” he said.