World Bank Warns Global Economy At Risk Of Recession

The World Bank slashed its growth forecasts for most countries and regions on Tuesday.

It warned that new shocks could tip the global economy into a recession.

“Global GDP will probably increase 1.7% this year, about half the pace forecast in June,” Report says.

This would be the third-worst performance in the past three decades or so, after the contractions of 2009 and 2020.

The bank, which also cut its growth estimates for 2024, said persistent inflation and higher interest rates are among the key reasons. It also cited the impact of Russia’s invasion of Ukraine, and a decline in investment.

“The crisis facing development is intensifying” and the setbacks to global prosperity is likely to persist, World Bank president David Malpass wrote in a foreword to the bank’s semi-annual Global Economic Prospects report.

He said; “GDP in emerging-market and developing economies at the end of next year will be about 6% below the level expected on the eve of the Covid-19 pandemic.”

Spillovers from a period of pronounced weakness in the US, China and the EU are worsening other headwinds faced by poorer nations.

While inflation is moderating, there are signs that pressures are becoming more persistent, with central banks having to raise interest rates faster than expected.

The World bank said; “The combination of slow growth, tightening financial conditions, and heavy indebtedness is likely to weaken investment and trigger corporate defaults. Urgent global action is needed to mitigate the risks of global recession and debt distress.”

The World Bank however called for a “major increase” in investment for developing nations, including new financing from the international community and from the repurposing of existing spending, such as inefficient agricultural and fuel subsidies.