'Urgent Actions Needed': World Bank Slashes Forecasts And Warns Of Global Recession In 2023

Just a week after the IMF (International Monetary Fund) warned about recession affecting about one-third of economies this year and the rest likely to feel the recession, the World Bank issued similar warnings.

¡°The combination of slow growth, tightening financial conditions, and heavy indebtedness is likely to weaken investment and trigger corporate defaults," the World Bank said, as per Bloomberg. ¡°Urgent global action is needed to mitigate the risks of global recession and debt distress."

World Bank Slashes Growth Forecasts

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The World Bank has slashed its 2023 growth forecasts to levels teetering on the brink of recession for many countries as the impact of central bank rate hikes intensifies, Russia's war in Ukraine continues, and the world's major economic engines sputter. Earlier in September last year, the World Bank had already mentioned about rising risk of global recession in 2023.

World Bank has said that it expected global GDP growth of 1.7% in 2023, the slowest pace outside the 2009 and 2020 recessions since 1993. In its previous Global Economic Prospects report in June 2022, the bank had forecast 2023 global growth at 3.0%.

It forecasts global growth in 2024 to pick up to 2.7% -- below the 2.9% estimate for 2022 -- and said average growth for the 2020-2024 period would be under 2% -- the slowest five-year pace since 1960, as per Reuters.

The bank said major slowdowns in advanced economies, including sharp cuts to its forecast to 0.5% for both the United States and the euro zone, could foreshadow a new global recession less than three years after the last one.

Also Read; How To Be Financially Prepared For A Recession

What Could Push The World Into Recession

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"Given fragile economic conditions, any new adverse development -- such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions, could push the global economy into recession," the bank said in a statement accompanying the report.

The bleak outlook will be especially hard on emerging markets and developing economies, the World Bank said, as they struggle with heavy debt burdens, weak currencies and income growth, and slowing business investment that is now forecast at a 3.5% annual growth rate over the next two years, less than half the pace of the past two decades.

"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," World Bank President David Malpass said in a statement, as per Reuters report.

The report also mentioned that China's growth in 2022 slumped to 2.7%, its second slowest pace since the mid-1970s after 2020, as zero-COVID restrictions, property market turmoil and drought hit consumption, production and investment, the World Bank report said. It predicted a rebound to 4.3% for 2023, but that is 0.9 percentage point below the June forecast due to the severity of COVID disruptions and weakening external demand.

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