There hasn’t been a second recession in the same decade since more than 80 years ago, but the world economy is just one more blow away from it.
This is the most recent cautionary statement from the World Bank, which on Tuesday drastically cut its prediction for global economic growth.
Now, according to the organization, the global economy will only grow by 1.7% this year, which will be devastating for developing nations that have already been severely impacted by the pandemic and rising interest rates. In 2024, it predicts that growth will pick back up to 2.7%.
A Development Crisis Unfolding
“The crisis facing development is intensifying as the global growth outlook deteriorates,” World Bank President David Malpass said in a statement.
Growth is being hampered by high inflation, aggressive central bank policies, deteriorating financial conditions, and fallout from Russia’s invasion of Ukraine.
Therefore, “further negative shocks” could be sufficient to start a recession, according to the World Bank, including increased inflation, tighter monetary policy, and an increase in geopolitical tensions.
During the pandemic recession of 2020, the world economy contracted by 3.2% before roaring back in 2021. The last time two recessions occurred in the same decade was in the 1930s.
The group predicted that the US economy will only expand by 0.5% in 2023. It is not anticipated that any aggregate growth will occur in the 20 euro-using nations, which have already been severely impacted by the conflict in Ukraine. Both predictions are far worse than they were in June 2022.
Following the release of COVID-19 restrictions, growth in China is anticipated to rise in 2023, reaching 4.3%. But that projection is also lower than it was six months ago, as a result of the country’s real estate market’s persistent instability, reduced international demand for Chinese goods, and continuous pandemic disruptions.
Impact on Poor Countries
“The world’s three major engines of growth — the United States, the euro area and China — are undergoing a period of pronounced weakness,” the World Bank said in its report.
Poorer nations will also be harmed by this retreat, as they have already seen the effects of rising rates, a sluggish economy, and less corporate investment. Dealing with high debt levels may become increasingly difficult if borrowing costs rise.
The World Bank estimates that by the end of 2024, economic production in emerging markets and developing nations will be around 6% below pre-pandemic levels. Additionally, income growth is anticipated to be less rapid than it was on average in the ten years prior to Covid, making it more difficult to catch up to richer countries.
Akua Karle Okyere
Akua Karle Okyere is a lifestyle blogger at The Vocal Ghanaian and also a PR technician. She enjoys researching on travels and tours and writing fictional stories in her leisure time.
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