World Bank downgrades outlook for global economy

A dire outlook for the global economy was issued by the World Bank on Tuesday, with officials warning that the planet’s financial health was “on a razor’s edge”.

The US-based international lender said in its latest Global Economic Prospects report that it now expected the world’s economy to expand by just 1.7% this year.

That was a serious downgrade from its previous estimate of 2.9% in 2022.

According to the Financial Times, if the World Bank’s expectations turned true, the 2020s would become the first decade since the 1930s to undergo two global recessions.

“The risks that we warned of six months ago have materialised and our worst-case scenario is now our baseline scenario,” World Bank economist Ayhan Kose said.

“The world’s economy is on a razor’s edge and could easily fall into recession if financial conditions tighten.”

Tuesday’s dire warning came on the back of a similarly gloomy outlook from the International Monetary Fund, whose managing director Kristalina Georgieva warned last week that a third of the world’s economy would fall into recession in 2023.

The World Bank’s report said advanced economies would expand 0.5% in 2023, down from 2.5% last year, while the rest of the world’s growth prospects were unchanged at 3.4%.

Excluding China, however, developing economies would see growth of 2.7% in 2023, down from 3.8% in 2022.

It said high inflation, rising interest rates, lower investment and Russia’s ongoing invasion of Ukraine were behind its downward revisions.

Reporting by Josh White for Sharecast.com.