The World Bank raised its forecast for global economic growth this year to 2.1%, but said the situation remained precarious.
The World Bank's latest report assessed global economic growth better than previously estimated, thanks to stable US consumer spending and China's faster-than-expected reopening at the beginning of the year.
The somewhat improved outlook for 2023 also fits with other data showing the U.S. and much of Europe have so far avoided the recession many experts predicted would hit this year.
However, compared to last year's growth of 3.1%, the economy is still slowing this year. In advanced economies, growth is expected to be 0.7% this year, down from 2.6% in 2022. US GDP is also forecast to grow 1.1% in 2023, after growing 2.1% last year. Meanwhile, eurozone GDP is forecast to be 0.4%, compared to 3.5% last year.
Emerging markets and developing economies (EMDEs) (excluding China) are expected to grow 2.9% this year, down from 4.1% last year. Debt pressures from rising interest rates are increasing in these markets, said Indermit Gill, chief economist and senior vice president at the World Bank Group.
At the same time, trade will grow at less than a third of the pace it did in pre-pandemic years. Fiscal weaknesses have left many low-income countries in debt distress. “The global economy remains in a precarious state,” he said.
The outlook for 2024 is even worse, according to the World Bank, which forecasts the US economy to slow to 0.8% next year. The overlapping shocks from the pandemic, the conflict in Ukraine and tightening global financial conditions pose a long-term obstacle to growth for EMDEs.
By the end of 2024, growth in these economies is expected to be about 5% lower than what was predicted before Covid-19 struck. The damage is particularly severe in low-income countries, especially the poorest ones. More than a third of these countries will have per capita incomes lower next year than they did in 2019.
“Many developing economies are now struggling to cope with weak growth, persistently high inflation and record debt levels,” said Ayhan Kose, deputy chief economist of the World Bank Group. New risks such as financial stress in developed countries could make life harder for poorer countries.
Rising interest rates have exacerbated the financial situation of low-income economies (those with a gross national income (GNI) per capita of $1,085 or less, as measured by the World Bank’s Atlas methodology), the report said. Public debt now averages about 70 percent of GDP in this group, with 14 countries already in or at high risk of debt distress.
Phien An
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