The global economy is “dangerously close” to recession this year, the World Bank warned in its latest edition. semi-annual report.
International lenders cut their global growth forecast by nearly half to 1.7% as growth slowed in the world’s top economies in the US, Europe and China. This estimate is down from his previous forecast of 3% six months ago.
If forecasts are accurate, this would be the third weakest annual expansion in nearly 30 years, behind only the recession caused by the COVID-19 pandemic and the 2008-2009 financial crisis.
“The global economy is slowing dangerously into a recession defined as a contraction in annual global per capita income just three years after the 2020 pandemic recession,” the report said. there is State.
The outlook warns that global inflation may not ease or may rise further due to new supply disruptions. This would force central banks to raise policy rates higher and faster, increasing financial stress, the report said.
According to the World Bank, the US may avoid a recession in 2023, with growth expected to slow by 0.5% from the previous forecast of 2.2%. However, the European Union economy is not expected to grow, and experts expect her 4.3% expansion in China.
The study’s authors warn that a global recession will weigh heavily on emerging market and developing economies (EMDEs). EMDEs are already forecast to slow to 2.7% amid rising inflation, tightening financial conditions, currency depreciation and a range of economic headwinds.
“The risks we warned of six months ago have become real, and the worst-case scenario is now our base case,” said World Bank economist Ayhan Kose. “The global economy is in crisis and could easily slide into recession if financial conditions tighten.”
This comes on the heels of International Monetary Fund (IMF) President Kristalina Georgieva warning that a third of the global economy is in recession. Even states that avoided a recession “will feel like a recession for hundreds of millions of people,” she said. told CBS on Sunday.
“For most of the global economy, this will be a tough year, even tougher than the year we will be behind,” said Georgieva. “Why? Because her three largest economies—the US, the EU, and China—are all slowing down at the same time.”
Currently, the IMF project Global growth will slow to 2.7% this year from 3.2% in 2022.
Is the outlook for the global economy bleak?
Many financial institutions, organizations and economists believe the global economy could come to a significant halt this year due to a recession or slowing growth.
S&P Global sees a mild recession in the US and Europe as our base case, but modest expansion in the Middle East, Asia-Pacific and Africa should support the global economy this year.
“Global real GDP growth is projected to slow from nearly 3% in 2022 to half that pace in 2023.” Outlook for next year.
JPMorgan Chase does not believe the global economy faces an “imminent risk” of slipping into recession, with growth expected to be around 1.6%.But that baseline view A U.S. recession is likely by the end of 2023.
“Although the global growth outlook remains subdued as the COVID problem in China and the natural gas crisis in Europe worsen in the winter, we do not believe there is an imminent risk of the global economy slipping into recession in early 2023. No, supply chain declines and commodity price shocks,” said Bruce Kassman, head of economic and policy research at JP Morgan. “Depending on the circumstances, different scenarios need to be considered. The dominant event in the various scenarios presented is a US recession, but the timing of this break, the Fed’s policy direction, and the global The impact will be different.”
According to Morgan Stanley, global GDP growth will reach 2.2%, while the US economy will grow just 0.5%.
“Over the past 12 months, the Federal Funds rate has risen at its fastest rate since 1981 and the European Central Bank (ECB) rate has risen at its fastest rate since the founding of the Eurozone.” I have written Note from Morgan Stanley Chief Global Economist Seth B. Carpenter. “However, as consumer goods supply chains recover and labor market frictions recede, there is the potential for a sharper and broader decline in inflation, which will provide a somewhat easier path to policy and global economic growth. It means achieving higher growth.”
Lei Wang, international equity portfolio manager at Thornburg Investment Management, believes this will have knock-on effects across the three major economies.
“We are all aware that growth in the US and Europe is slowing, and consumers will likely be budget-hungry in the coming years.” China’s export demand will slow. “Instead of boosting or stimulating China’s economy, it will be a drag on the economy.”
last month economic forecast survey Officials forecast US growth of 0.5% in 2023, followed by a weak pace of 1.6% in 2024 and 1.8% in 2025, according to a Federal Reserve announcement. .