The World Bank has released its latest Global Economic Prospects report, in which it has forecast global GDP growth of 1.7 per cent in 2023, down from 2.9 per cent in 2022.
This would be followed by a slight increase in 2024, when annual global GDP growth is forecast to hit 2.7 per cent.
The slowdown is expected to be characterised by elevated inflation, a higher interest rate environment, subdued investment activity, and disruptions caused by the ongoing Russia-Ukraine conflict.
According to the World Bank, these downside factors could push the global economy into a second recession within the same decade — the first time in over 80 years.
The slowdown is tipped to affect 95 per cent of advanced economies and nearly 70 per cent of emerging market and developing economies.
GDP growth across advanced economies is projected to slow from 2.5 per cent in 2022 to 0.5 per cent in 2023, with this scale of weakness over the past two decades foreshadowing a global recession.
Among the advanced economies, the Eurozone is expected to record the weakest GDP growth in 2023 (0 per cent), followed by the United States (0.5 per cent), and Japan (1 per cent).
China’s GDP is expected to buck the trend, tipped to grow 4.3 per cent in 2023, up from 2.7 per cent in 2022. This is expected to come off the back of the loosening of Beijing’s COVID-19 restrictions.
World Bank Group president, David Malpass, flagged the risks of a forecasted global recession on emerging and developing economies, where per capita income growth is projected to average just 2.8 per cent over the next two years — below the 3.8 per cent average between 2010–2019.
“The crisis facing development is intensifying as the global growth outlook deteriorates,” he observed.
“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.
“Weakness in growth and business investment will compound the already-devastating reversals in education, health, poverty, and infrastructure, and the increasing demands from climate change.”
By the end of 2024, GDP levels across emerging and developing economies have been tipped to fall 6 per cent below levels expected prior to the COVID-19 pandemic.
According to the World Bank, gross investment in emerging and developing economies would grow by an average of 3.5 per cent between 2022–24 — less than half the rate recorded over the previous two decades.
“Subdued investment is a serious concern because it is associated with weak productivity and trade, and dampens overall economic prospects. Without strong and sustained investment growth, it is simply impossible to make meaningful progress in achieving broader development and climate-related goals,” Ayhan Kose, director of the World Bank’s Prospects Group, said.
“National policies to boost investment growth need to be tailored to country circumstances, but they always start with establishing sound fiscal and monetary policy frameworks and undertaking comprehensive reforms in the investment climate.”
