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Financial News: Global Economy To Undergo Sharp Slowdown: World Bank

Global Economy To Undergo Sharp Slowdown: World Bank

01/11/2023 - 08:04:00 (RTTNews)

(RTTNews) - The world economy is set to experience a sharp slowdown in growth this year on the back of elevated inflation, higher interest rates, subdued investment and disruptions caused by the war in Ukraine, the World Bank said Tuesday.

The global economy is forecast to expand 1.7 percent this year, which would be the third weakest growth in nearly three decades, the World Bank said in its latest Global Economic Prospects report. The outlook was revised down from 3.0 percent estimated previously.

The projection for next year was also lowered, down to 2.7 percent from 3.0 percent. The Washington-based lender observed that risks to the growth outlook are tilted to the downside. The lender called for urgent action to attenuate the risk of global recession partly stemming from monetary tightening.

The bank cautioned that adverse developments, namely higher-than-expected inflation, sudden rise in interest rates, a resurgence of the pandemic or escalating geopolitical tensions could push the global economy into a recession.

The World Bank forecast the United States, the euro area, and China to undergo a period of pronounced weakness, and the resulting spillovers to exacerbate headwinds to emerging economies.

"The crisis facing development is intensifying as the global growth outlook deteriorates," said World Bank Group President David Malpass.

In the United States, growth is forecast to ease sharply to 0.5 percent in 2023, down by 1.9 percentage points from the prior forecast and an estimated 2.5 percent expansion in 2022.

In 2023, Eurozone growth is seen at zero percent, which reflects a downward revision of 1.9 percentage points. Both the US and the euro area are forecast to expand 1.6 percent each in 2024.

In China, economic growth is projected at 4.3 percent in 2023 and 5.0 percent next year. Activity in China remains vulnerable to a prolonged drag from the real estate sector and continued pandemic-related disruptions, the lender noted.

The bank forecast Japan GDP to grow 1.0 percent in 2023 and 0.7 percent next year.

India's economic growth is seen at 6.6 percent this year before falling back toward its potential rate of just above 6.0 percent in 2024. India is expected to be the fastest growing economy of the seven largest emerging-market and developing economies, or EMDEs.

The latest projections suggested that GDP levels in emerging-market and developing economies will be around 6 percent below the level expected on the eve of the pandemic.

Global trade is also forecast to slow sharply alongside global growth, despite support from a continued recovery in services trade.

On price front, the lender said global headline inflation is expected to remain elevated at 5.2 percent in 2023 before slowing to 3.2 percent in 2024, above its 2015-19 average of 2.3 percent.

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