World Bank Warns Any New Adverse Development Could Push Global Economy Into Recession

The World Bank’s latest Global Economic Prospects report has warned that amid fragile economic conditions, any new adverse development such as higher-than-expected inflation, abrupt rises in interest rates, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions could push the global economy into recession.

“This would mark the first time in more than 80 years that two global recessions have occurred within the same decade,” it said.

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The report pointed out that over the next two years, per-capita income growth in emerging markets and developing economies is projected to average 2.8% — a full percentage point lower than the 2010-2019 average.

World Bank Group President David Malpass said the crisis facing development is intensifying as the global growth outlook deteriorates. “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,” he said.

Growth Projections: According to the report, growth in advanced economies is projected to slow from 2.5% in 2022 to 0.5% in 2023. Over the past two decades, slowdowns of this scale have foreshadowed a global recession, it noted. “In the United States, growth is forecast to fall to 0.5% in 2023 — 1.9 percentage points below previous forecasts and the weakest performance outside of official recessions since 1970,” it said.

The report also stated that GDP levels by the end of 2024 in emerging and developing economies will be close to 6% below the levels expected before the pandemic. “Although global inflation is expected to moderate, it will remain above pre-pandemic levels,” it said.

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