World Bank Issues Bleak Forecast for Global Economy

It slashes predictions for growth all over, including the US
By Newser Editors and Wire Services
Posted Jan 10, 2023 11:52 AM CST
World Bank: Global Economy 'Perilously Close' to Recession
Container cranes at a port in New Jersey appear behind the Statue of Liberty, Nov. 20, 2022, in New York. The global economy will come "perilously close" to a recession this year, led by weaker growth in all the world's top economies—the US, Europe, and China—the World Bank warned Tuesday.   (AP Photo/Julia Nikhinson, File)

The global economy will come “perilously close" to a recession this year, led by weaker growth in all the world's top economies—the United States, Europe, and China—the World Bank warned Tuesday, per the AP. In an annual report, the World Bank said it had slashed its forecast for global growth this year by nearly half, to just 1.7%, from its previous projection of 3%. That would be the third-weakest annual expansion in three decades, behind only the deep recessions that resulted from the 2008 global financial crisis and the pandemic in 2020. Though the United States might avoid a recession this year—the World Bank predicts the US economy will eke out growth of 0.5%—global weakness will likely pose another headwind for America's businesses and consumers, on top of high prices and more expensive borrowing rates.

The report also noted that rising interest rates in developed economies will attract investment capital from poorer countries, thereby depriving them of crucial domestic investment. At the same time, those high interest rates will slow growth in developed countries at a time when Russia's invasion of Ukraine has kept world food prices high. The impact of a global downturn would fall particularly hard on poorer countries in such areas as Saharan Africa. “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,” said David Malpass, president of the World Bank.

The World Bank projects that the EU's economy won't grow at all next year after having expanded 3.3% in 2022. It foresees China growing 4.3%, nearly a percentage point lower than it had previously forecast, and about half the pace that Beijing posted in 2021. Other economists have also issued bleak outlooks, though most of them not quite as dire. Economists at JPMorgan predict slow growth this year for advanced economies, but they don't expect a global recession. Last month, the bank predicted that slowing inflation will bolster consumers’ ability to spend and power growth in the US and elsewhere. (More World Bank stories.)

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