AP

World Bank: Recession a looming threat for global economy

Jan 10, 2023, 7:32 AM | Updated: Jan 11, 2023, 4:31 am

WASHINGTON (AP) — The global economy will come “perilously close” to a recession this year, led by weaker growth in all the world’s top economies — the United States, Europe and China — the World Bank warned on Tuesday.

In an annual report, the World Bank, which lends money to poorer countries for development projects, said it had slashed its forecast for global growth this year by nearly half, to just 1.7%, from its previous projection of 3%. If that forecast proves accurate, it would be the third-weakest annual expansion in three decades, behind only the deep recessions that resulted from the 2008 global financial crisis and the coronavirus pandemic in 2020.

Though the United States might avoid a recession this year — the World Bank predicts the U.S. economy will eke out growth of 0.5% — global weakness will likely pose another headwind for America’s businesses and consumers, on top of high prices and more expensive borrowing rates. The United States also remains vulnerable to further supply chain disruptions if COVID-19 keeps surging or Russia’s war in Ukraine worsens.

And Europe, long a major exporter to China, will likely suffer from a weaker Chinese economy.

The World Bank report also noted that rising interest rates in developed economies like the United States and Europe will attract investment capital from poorer countries, thereby depriving them of crucial domestic investment. At the same time, the report said, those high interest rates will slow growth in developed countries at a time when Russia’s invasion of Ukraine has kept world food prices high.

“Russia’s invasion of Ukraine has added major new costs,” World Bank President David Malpass said on a call with reporters. “The outlook is particularly devastating for many of the poorest economies where poverty reduction is already ground to a halt and access to electricity, fertilizer, food and capital is likely to remain limited for a prolonged period.”

The impact of a global downturn would fall particularly hard on poorer countries in such areas as Saharan Africa, which is home to 60% of the world’s poor. The World Bank predicts per capita income will grow just 1.2% in 2023 and 2024, which is such a tepid pace that poverty rates could rise.

“Weakness in growth and business investment will compound the already devastating reversals in education, health, poverty and infrastructure and the increasing demands from climate change,” Malpass said. “Addressing the scale of these challenges will require significantly more resources for development and global public goods.”

Along with seeking new financing so it can lend more to poorer countries, Malpass said, the World Bank is, among other things, seeking to improve its lending terms that would increase debt transparency, “especially for the rising share of poor countries that are at high risk of debt distress.”

The report follows a similarly gloomy forecast a week earlier from Kristina Georgieva, the head of the International Monetary Fund, the global lending agency. Georgieva estimated on CBS’ “Face the Nation” that one-third of the world will fall into recession this year.

“For most of the world economy, this is going to be a tough year, tougher than the year we leave behind,” Georgieva said. “Why? Because the three big economies — U.S., EU, China — are all slowing down simultaneously.”

The World Bank projects that the European Union’s economy won’t grow at all next year after having expanded 3.3% in 2022. It foresees China growing 4.3%, nearly a percentage point lower than it had previously forecast and about half the pace that Beijing posted in 2021.

The bank expects developing countries to fare better, growing 3.4% this year, the same as in 2022, though still only about half the pace of 2021. It forecasts Brazil’s growth slowing to 0.8% in 2023, down from 3% last year. In Pakistan, it expects the economy to expand just 2% this year, one-third of last year’s pace.

Other economists have also issued bleak outlooks, though most of them not quite as dire. Economists at JPMorgan are predicting slow growth this year for advanced economies and the world as a whole, but they don’t expect a global recession. Last month, the bank predicted that slowing inflation will bolster consumers’ ability to spend and power growth in the United States and elsewhere.

“The global expansion will turn into 2023 bent but not broken,” the JPMorgan report said.

___

Associated Press reporter Fatima Hussein contributed to this report.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Donald Trump appears in court for opening statements in his criminal trial for allegedly covering u...

Associated Press

Trump tried to ‘corrupt’ the 2016 election, prosecutor alleges as hush money trial gets underway

Donald Trump's criminal trial in New York over alleged hush money payments started with opening statements on Monday.

8 hours ago

This satellite image from Planet Labs PBC shows Iran's nuclear site in Isfahan, Iran, April 4, 2024...

Associated Press

Israel, Iran play down apparent Israeli strike. The muted responses could calm tensions — for now

Israel and Iran are both playing down an apparent Israeli airstrike near a major air base and nuclear site in central Iran.

3 days ago

Speaker of the House Mike Johnson, R-La., talks to reporters just after lawmakers pushed a $95 bill...

Associated Press

Ukraine, Israel aid advances in rare House vote as Democrats help Republicans push it forward

The House pushed ahead Friday on a foreign aid package of $95 billion for Ukraine, Israel, Taiwan and other sources of humanitarian support.

3 days ago

southern Arizona rancher George Alan Kelly...

Associated Press

Trial of a southern Arizona rancher charged in fatal shooting of unarmed migrant goes to the jury

Closing arguments were made against a southern Arizona rancher accused of shooting an undocumented migrant on his land to death on Thursday.

4 days ago

Donald Trump's hush money trial: 12 jurors selected...

Associated Press

Although 12 jurors were picked for Donald Trump’s hush money trial, selection of alternates is ongoing

A jury of 12 people was seated Thursday in former President Donald Trump's hush money trial. The proceedings are close to opening statements.

4 days ago

A anti-abortion supporter stands outside the House chamber, Wednesday, April 17, 2024, at the Capit...

Associated Press

Democrats clear path to bring proposed repeal of Arizona’s near-total abortion ban to a vote

Democrats in the Arizona Senate cleared a path to bring a proposed repeal of the state’s near-total ban on abortions to a vote.

5 days ago

Sponsored Articles

...

DESERT INSTITUTE FOR SPINE CARE

Desert Institute for Spine Care is the place for weekend warriors to fix their back pain

Spring has sprung and nothing is better than March in Arizona. The temperatures are perfect and with the beautiful weather, Arizona has become a hotbed for hikers, runners, golfers, pickleball players and all types of weekend warriors.

...

Collins Comfort Masters

Here’s 1 way to ensure your family is drinking safe water

Water is maybe one of the most important resources in our lives, and especially if you have kids, you want them to have access to safe water.

...

Collins Comfort Masters

Avoid a potential emergency and get your home’s heating and furnace safety checked

With the weather getting colder throughout the Valley, the best time to make sure your heating is all up to date is now. 

World Bank: Recession a looming threat for global economy