Deniz Kılınç / Istanbul, January 17 (HNA) – Global growth is expected to decelerate sharply to 1.7 percent in 2023, the third weakest pace of growth in nearly three decades, overshadowed only by the global recessions caused by the pandemic and the global financial crisis, according to the flagship report, “Global Economic Prospects” by the World Bank, released recently.
“This is 1.3 percentage points below previous forecasts, reflecting synchronous policy tightening aimed at containing very high inflation, worsening financial conditions, and continued disruptions from the Russian Federation’s invasion of Ukraine” read the report and added:
“The United States, the euro area, and China are all undergoing a period of pronounced weakness and the resulting spillovers exacerbate other headwinds faced by emerging market and developing economies (EMDEs).”
“Our latest forecasts indicate a sharp, long-lasting slowdown, with global growth declining to 1.7 percent in 2023 from 3.0 percent expected just six months ago,” wrote David Malpass, World Bank Group President, in the Forward message of the report.
“The latest Global Economic Prospects report highlights why the outlook is particularly devastating for many of the poorest economies, where poverty reduction has already ground to a halt. Total debt among EMDEs is at a 50-year high, and Russia’s invasion of Ukraine has added major new costs. This leaves no room for fiscal support at a time when people are still suffering from COVID-related setbacks in health, education and nutrition” Malpass underlined.
The combination of slow growth, tightening financial conditions, and heavy indebtedness is likely to weaken investment and trigger corporate defaults, stated in the report, pointing out to further negative shocks, such as higher inflation, even tighter policy, financial stress, deeper weakness in major economies, or rising geopolitical tensions—could push the global economy into recession.
“In the near term, urgent global efforts are needed to mitigate the risks of global recession and debt distress in EMDEs” warned the report, adding that, given limited policy space, it is critical that national policymakers ensure that any financial support is focused on vulnerable groups, that inflation expectations remain well anchored, and that financial systems continue to be resilient and added:
“Policies are also needed to support a major increase in EMDE investment, which can help reverse the slowdown in long-term growth exacerbated by the overlapping shocks of the pandemic, the invasion of Ukraine, and the rapid tightening of global monetary policy. This will require new financing from the international community and from the repurposing of existing spending, such as inefficient agricultural and fuel subsidies.”
“One global starting point is to veer away from the wasteful subsidies that prevail and redirect the savings to more productive uses including private sector investment, targeted time-bound subsidies, and impactful climate investments” Malpass added his remarks, and went on as follows:
“Even though the world is now in a very tight spot, there should be no room for defeatism. The latest Global Economic Prospects report makes it clear that there are significant reforms that could be undertaken now to strengthen the rule of law, improve the outlook and build stronger economies with more robust private sectors and better opportunities for people around the world.”