World Bank: Recession is a threat to the global economy | lifestyle

WASHINGTON (AP) — The global economy is “dangerously close” to recession this year, led by weaker growth in all of the world’s leading economies — the United States, Europe and China — the World Bank warned Tuesday.

In an annual report, the World Bank, which lends money to poorer countries for development projects, said it had cut its forecast for global growth this year by nearly half, to just 1.7%, from a previous projection of 3%. If the forecast proves accurate, it would be the third weakest annual expansion in three decades, behind only the deep recession that resulted from the global financial crisis in 2008 and the coronavirus pandemic in 2020.

Although the United States could avoid recession this year — the World Bank predicts the U.S. economy will grow by 0.5% — global weakness is likely to pose additional headwinds for U.S. businesses and consumers, in addition to high prices and more expensive borrowing rates. The United States also remains vulnerable to further supply chain disruptions if COVID-19 continues to escalate or Russia’s war in Ukraine worsens.

And Europe, long a major exporter to China, is likely to suffer from a weaker Chinese economy.

The World Bank report also noted that rising interest rates in advanced economies such as the United States and Europe will attract investment capital from poorer countries, depriving them of crucial domestic investment. The report also said these high interest rates will slow growth in developed countries at a time when Russia’s invasion of Ukraine has kept global food prices high.

“Russia’s invasion of Ukraine has brought new heavy costs,” World Bank President David Malpass said in a phone call with reporters. “The outlook is particularly bleak for many of the poorest economies, where poverty reduction has already stalled and access to electricity, fertiliser, food and capital is likely to remain limited for an extended period.”

The impact of a global downturn would be particularly hard on poorer countries in areas such as sub-Saharan Africa, home to 60% of the world’s poor. The World Bank predicts that per capita income will grow by only 1.2% between 2023 and 2024, a pace so tepid that poverty rates could rise.

“Weak growth and business investment will compound the already devastating reversals in education, health, poverty and infrastructure and the increasing demands of climate change,” Malpass said. “Addressing the scale of these challenges will require significantly more resources for development and global public goods.”

Along with seeking new financing to lend more to poorer countries, the World Bank is seeking, among other things, to improve its lending conditions, which would increase debt transparency, “especially due to the growing share of poor countries that are at high risk of debt distress.”

The report follows a similarly gloomy forecast a week earlier from Kristina Georgieva, head of the International Monetary Fund, the global credit agency. Georgieva estimated on CBS’ “Face the Nation” that one-third of the world will fall into recession this year.

“It’s going to be a tough year for most of the world economy, tougher than the year we’re leaving behind,” Georgieva said. “Why? Because the three big economies – US, EU, China – are all slowing at the same time.

The World Bank predicts that the European Union’s economy will not grow at all next year after growing by 3.3% in 2022. It projects China’s growth at 4.3%, nearly a percentage point less than it originally forecast and roughly half the pace reported by Beijing. in 2021.

The bank expects developing countries to fare better, growing 3.4% this year, the same as in 2022, though still only about half the pace of 2021. It predicts Brazil’s growth will slow to 0.8 in 2023 %, which is a decrease from last year’s 3%. In Pakistan, it expects the economy to grow by just 2% this year, a third of last year’s pace.

Other economists also issued gloomy outlooks, though most were not as dire. Economists at JPMorgan forecast slow growth for advanced economies and the world as a whole this year, but do not expect a global recession. Last month, the bank predicted that slowing inflation would boost consumer spending and boost growth in the United States and elsewhere.

“Global expansion turns into 2023 bent but not broken,” the JPMorgan report said.

Associated Press reporter Fatima Hussein contributed to this report.

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