The World Bank has warned that the global economy risks its second recession within three years in 2023.
The institution said that any fresh setback to a global economy already rapidly weakening as a result of high inflation, interest rates, and war could result in another recession.
Not since the 1930s have two global recessions occurred in the same decade. The institution makes a report on the economy every half a year.
The World Bank said it had cut its 2023 growth forecast from 2.9 percent to 1.7 percent after the risks it identified six months ago all materialized.
The Bank’s global economic prospects report said the tougher than anticipated anti-inflationary measures, persistently high energy prices, and continued lockdowns in China had led to a much weaker outlook for this year than it had expected last summer.
Almost every advanced country and nearly 70 percent of emerging and developing countries have had their growth forecasts cut.
The World Bank said that the global economy has such fragility that any new adverse development could push the economy into a recession.
This would include higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the Covid pandemic, or escalating geopolitical tensions.
The World Bank’s mission is to reduce poverty. The deterioration in the global economic outlook means the crisis facing development is intensifying, World Bank President David Malpass said.
“Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment as global capital is absorbed by advanced economies faced with extremely high government debt levels and rising interest rates,” Malpass said.
He said that weakness in growth and business investment will compound already-devastating reversals in education, health, poverty, and infrastructure and the increasing demands from climate change.