The World Bank (WB) on Tuesday sharply revised its global growth forecast for 2023, which it now anticipates at 1.7% against 3% last June, due to persistent inflation, rising interest rates and effects of the war in Ukraine.
The international institution, in its report on the world economic outlook, revised its forecasts for almost all developed countries and nearly 70% of emerging or developing countries, with in particular weak growth in the United States and zero in Europe.
“I am very worried about the risk of the slowdown persisting. According to our estimates, global growth between 2020 and 2024 will be less than 2%. This is the lowest five-year growth since 1960,” WB Chairman David Malpass told a press conference call.
It only expects a moderate global recovery in 2024 (+2.7%).
And the trend could get even worse, with a real risk of recession, in the event of another shock to the economy, whether caused by a resumption of inflation, a new wave of COVID-19 or geopolitical tensions.
If central banks raised rates by one percentage point globally, “global growth would be 0.6% lower, which means a 0.3% decline in GDP per capita”, and therefore “A global technical recession”, detailed for AFP Ayhan Kose, director of the WB research group.
In such a scenario, the 2020s would be the first decade since World War II to face two recessions, the World Bank said.
It is in the developed countries that the slowdown will be most noticeable. The institution forecasts only 0.5% growth in the United States (against 1.9% last June) and zero growth in the euro zone (also against 1.9%).
But emerging countries are not spared either, Chinese growth was now expected at 4.3% (0.9 percentage point less) and 2.7% in other emerging and developed countries.
Poverty and the fight against global warming affected
The World Bank is concerned about the consequences of this slowdown, both from a social point of view and in terms of the fight against global warming.
In sub-Saharan Africa, which accounts for 60% of people considered to be in a state of extreme poverty, the expected growth should be insufficient to make it possible to fight against poverty.
“We expect a growth of 1% of GDP per capita, this is far below what is necessary to eliminate extreme poverty”, underlined Ayhan Kose, “it will be almost impossible to reduce poverty or even inequality to levels we would like”.
Especially since the majority of the countries concerned are facing a difficult situation with regard to their public debt, with both the World Bank and the International Monetary Fund (IMF) warning repeatedly of the risk of seeing some sixty States falling into a public debt crisis.
The president of the institution recalled that “we have regularly defended a rapid and effective restructuring of the debts but the negotiations remain at a standstill”.
“The risks of a debt crisis and political instability could push millions of people into poverty and hamper the ability of countries to meet basic needs and the consequences of global warming”, worried Mr. Malpass.
The fight against global warming is already a victim of the slowdown, while global investments are expected to decline for 2023.
“Investments have been low over the past decade, even more over the last three years and they should be even lower over the next two years”, according to Ayhan Kose.
The World Bank estimates that a climate-induced natural disaster affecting one of the 37 smallest countries in the world, with a population of less than 1.5 million, could lead to a 5% drop in the GDP of those countries.
Countries “already weakened by the pandemic” and which “do not have the capacity to cope with the economic consequences of a climatic event”, according to Mr. Kose.