WorlThe World Bank Group’s most recent analysis reveals that global economic output is predicted to be a mere 1.7% in 2023, indicating a significant decline in global growth.
Economists at the World Bank are cautioning that this economic downturn could have widespread effects, and any negative developments could potentially lead to a global recession.
The impact of slowing growth is being felt by 95% of advanced economies and nearly 70% of emerging markets and developing economies. Furthermore, this could lead to an increase in poverty rates in certain areas.
The Director of the World Bank’s Prospects Group, Ayhan Kose joins Expert Answers to discuss the recently released report.
Speaking about the report, Ayhan said, “This year the big headline is unfortunately, once again, the global economy is in a tight spot. We downgraded our global growth forecast.
“We are now expecting global growth to be around 1.7%. This is half of almost what we expected six months ago. So, the global economy is on a razor’s edge. Even a small shock can trigger an outright recession.”
When asked about the economic slowdown during the discussion, the World Bank expert said, “Slowdown is a very sharp one, and it is broad-based. Relative to six months ago, when we released the Global Economic Prospects in June, we downgraded our forecast for 2023 for around 75% of countries around the world.
“For advanced economies, we downgraded this year’s forecast for almost all of them. For emerging market developing economies, we downgraded nearly 70% of them.
“In the case of advanced economies, we are expecting a very deep downturn. So, they’re going to slow from 2.5% last year to 0.5% this year.
“This is one of the sharpest slowdowns we have seen over the past five decades. And when these types of slowdowns actually take place in advanced economies, they have forestalled global recessions.”
According to the expert, the US is expecting very weak growth at 0.5%, and the Euro area is projected to have zero growth, which is also not good. There are debates about whether or not they will have a recession, but even without an official recession, the effects will feel similar.
The host asked Ayhan if there was any good news about the global economy despite the challenges.
Responding to this, he said, “Yes, good news. Good news are there. First of all, there is greater recognition of the inflation problem. Especially during the past year, major central banks, central banks in emerging market developing economies have been acting decisively to get ahead of the inflation problem.
“Six months ago, we talked about the threat of stagflation, but the policymakers acted decisively. So, we think that inflation will moderate, and that’s good news.”
The World Bank Expert said, “I think the second piece of good news is on the financial stability front. Despite repeated interest rate increases, the financial sector has been resilient. This does not necessarily mean that there are some cracks here and there in the system.
“We will see this year, hopefully there won’t be a major crack. And I think the third important news, when we look back to 2022, there is greater recognition by the global community: the need for larger resources to address the climate change problem.”