According to the World Bank’s new Global Economic Prospects report, global growth is projected to decelerate to 2.1% this year, falling from 3.1% in 2022. The bank forecasts a significant slowdown during the last half of this year.
That would match the global growth rate during the 2008 financial crisis.
According to the World Bank, higher interest rates, inflation, and more restrictive credit conditions will drive the economic downturn.
The report forecasts that growth in advanced economies will slow from 2.6% in 2022 to 0.7% this year and remain weak in 2024.
The World Bank’s Global Economic Prospects report issued this month, June 2023, projects that after growing 3.1 percent last year, the global economy is set to slow substantially in 2023, to 2.1 percent, amid continued monetary policy tightening to rein in high inflation, before a tepid recovery in 2024, to 2.4 percent. Tight global financial conditions and subdued external demand are expected to weigh on growth across emerging market and develop- ing economies (EMDEs). Projections for many countries have been revised down over the forecast horizon, with upgrades primarily due to stronger-than-expected data at the beginning of 2023 more than offset by downgrades thereafter. Inflation has been persistent but is projected to decline gradually as demand weakens and commodity prices moderate, provided longer-term inflation expectations remain anchored.
Global Economic Prospects — June 2023
Global growth could be weaker than anticipated in the event of more widespread banking sector stress, or if more persistent inflation pressures prompt tighter-than-expected monetary policy. Weak growth prospects and heightened risks in the near term compound a long-term slowdown in potential growth, which has been exacerbated by the overlapping shocks of the pandemic, the Russian Federation’s invasion of Ukraine, and the sharp tightening of global financial conditions. This difficult context highlights a multitude of policy challenges. Recent bank failures call for a renewed focus on global financial regulatory reform. Global cooperation is also necessary to accelerate the clean energy transition, mitigate climate change, and provide debt relief for the rising number of countries experiencing debt distress. At the national level, it is imperative to implement credible policies to contain infla- tion and ensure macroeconomic and financial stability, as well as undertake reforms to set the foundations for a robust, sustainable, and inclu- sive development path.