The latest analysis from the World Bank Group predicts a sharp slowdown in global economic growth, with an expected growth rate of only 1.7% in 2023. World Bank economists are sounding alarms about the widespread nature of this downturn, which poses a significant risk of pushing the global economy into recession. The deceleration in growth is affecting 95% of advanced economies and nearly 70% of emerging markets and developing economies, potentially leading to increased poverty rates in some regions.
The global economy is in a precarious state, with growth projections downgraded to 1.7%, half of what was expected just six months ago. This decline in growth indicates that the global economy is on the verge of a recession, susceptible to even minor shocks.
The impact of the economic slowdown is extensive. Approximately 75% of countries have witnessed downgraded growth forecasts compared to six months ago. Advanced economies are expected to experience a deep slowdown, with growth rates dropping from 2.5% last year to 0.5% this year. The U.S. and the Euro area are facing challenges with growth rates close to zero, making the possibility of a recession a tangible concern.
A range of risks is looming, with one major concern being the persistence of high inflation. An increase in global policy interest rates to 6% could trigger recessions in major economies, leading to a global recession. In many emerging market developing economies, per capita income growth is projected to be less than 3%, making it challenging to make meaningful progress in addressing poverty.
Investment growth is a key factor in achieving development goals. Unfortunately, investment growth has been slowing in recent years, especially after the pandemic. The recovery has been slow, and investment growth is projected to be around 3% to 4%, which is significantly lower than what’s needed for robust economic development.
Small states, particularly those with populations of 1.5 million or less, have been particularly vulnerable to economic shocks.
Despite these challenges, there is some room for optimism. Policymakers are taking action to address high inflation and financial stability. The global community is increasingly recognizing the need for resources to combat climate change, providing hope for positive change.