World Bank pessimistic for global growth in 2023

Europe 1 with AFP 4:28 p.m., January 10, 2023

The World Bank (WB) sharply revised its global growth forecast for 2023 on Tuesday, which it now anticipates at 1.7% against 3% last June, due to persistent inflation, rising interest rates and effects of the war in Ukraine.

The international institution, in its report on the global economic outlook, revised its forecasts for almost all developed countries and nearly 70% of emerging or developing countries, with in particular weak growth in the United States and zero in Europe. .

It then only expects a moderate global recovery in 2024 (+2.7%).

"This is the weakest growth over the last three decades" with the exception of the 2008 crisis and the consequences of the pandemic in 2020, insisted to AFP Ayhan Kose, director of the research group of the WB, "it is a complex evolution for the world economy and this slowdown is general".

Growth still fragile

And the trend could get even worse, with a real risk of recession, in the event of a new shock to the economy, whether caused by a resumption of inflation, a new wave of Covid or geopolitical tensions.

In the event of a rate hike of one percentage point by the central banks at the global level, "global growth would be 0.6% lower, which means a decline of 0.3% in GDP per capita", and therefore " a global technical recession," Kose said.

In such a scenario, the 2020s would be the first decade since the Second World War to be faced with two recessions, the WB said in its report.

It is in the developed countries that the slowdown will be the most sensitive, estimates the World Bank: it forecasts only 0.5% of growth in the United States (against 1.9% last June) and no GDP growth in the euro zone (also against 1.9%).

But the emerging countries are not spared either, Chinese growth was now expected at 4.3% (0.9 percentage point less) and the other emerging and developed countries should see their economy grow by 2.7%.

Poverty heavily affected

The WB is concerned about the consequences of this slowdown, both from a social point of view and in terms of the fight against global warming.

In sub-Saharan Africa, which includes 60% of people considered to be in a state of extreme poverty, the expected growth should be insufficient to effectively fight against poverty.

"We expect a growth of 1% of GDP per capita, this is far below what is necessary to eliminate extreme poverty", underlined Ayhan Kose, "it will be almost impossible to reduce poverty or even inequality to levels we would like".

Especially since the majority of the countries concerned are also facing a difficult situation regarding their public debt, with both the World Bank and the International Monetary Fund (IMF) warning repeatedly about the risk of seeing some sixty States switch in a public debt crisis.

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"Some states are simply trying to meet their debt obligations. In a downturn, that means they don't have the wherewithal to take action against poverty and fund health or education," he said. said Mr. Kose.

The same goes for the fight against global warming, while investments at the global level are expected to fall for 2023. "Investments have been low over the past decade, even more so over the last three years and they should still be weaker over the next two years", according to Ayhan Kose.

However, the WB report estimated that a climate-related natural disaster affecting one of the 37 smallest countries in the world, with a population of less than 1.5 million, could cause a drop of 5 % of the GDP of these countries.

"These are countries already weakened by the pandemic, which have not experienced such a strong recovery because their economy is partly based on tourism and which now face stricter financial conditions. They do not have the capacity to deal with the economic consequences of a climatic event," Kose said.