World Bank raises global growth forecast

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 reopening faster than expected in the first part of the year.

The somewhat improved outlook for 2023 also fits with other data showing the US and much of Europe have so far avoided the recession many experts predicted would hit this year.

However, compared with 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 with 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. Indermit Gill, chief economist and senior vice president at the World Bank Group, said debt pressures from rising interest rates were increasing in these markets.

Meanwhile, trade will grow at less than a third of the pace seen 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 will slow to 0.8% next year. The overlapping shocks from the pandemic, the Ukraine conflict and tightening global financial conditions pose a long-term obstacle to EMDE growth.

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 were 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 calculated using the World Bank Atlas method), the report said. Public debt now averages about 70 percent of GDP in this group, with 14 countries already or at high risk of debt distress.

Phien An

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