The World Bank has cut its global growth forecasts for mid-2022 amid what it sees as a broadly worsening economic situation.
In its latest report, the International Development Agency has cut almost all of its forecasts for the world’s developing economies and reduced its global economic growth outlook to 1.7 percent for 2023. The organization had previously predicted that the world economy would grow by 3% in 2023.
The revision was led by a significant downgrade in its outlook for the US economy – it now forecasts growth of 0.5% from a previous estimate of 2.4%.
The World Bank cut China’s growth forecast for 2023 from 5.2% to 4.3%, Japan from 1.3% to 1%, and Europe and Central Asia from 1.5% to 0.1%. is
“Global growth has slowed to such an extent that the global economy is at risk of heading into recession,” the World Bank said. The World Bank said it attributed the slow growth to “unexpectedly swift and coordinated” global monetary policy tightening.
The lowered projections would “mark the third weakest pace of growth in nearly three decades, eclipsed only by global crises caused by the global recession and global financial crisis.”
The World Bank said that tighter monetary policies by central banks around the world may be necessary to curb inflation, but they have “contributed to a significant deterioration in global financial conditions, which has put significant pressure on performance.”
“The United States, the euro area, and China are all going through periods of pronounced weakness, and as a result are exacerbating other violations facing emerging market and developing economies.”
The International Monetary Organization also lowered its forecasts for 2024, to 2.7% from a previous forecast of 3% growth.
China is the ‘key variable’
The World Bank said in its report that China’s faster-than-expected opening creates greater uncertainty for its economic recovery.
“Economic recovery [in China] May be delayed if reopening results in major outbreaks that overburden and undermine confidence in the health sector,” the report said. How will households, businesses and policymakers respond.”
A pedestrian walks in the Lujiazui financial district of Pudong on Tuesday, Jan. 3, 2023, in Shanghai, China.
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“China is a key variable and there may be a turning point for China if they push through Covid as quickly as they can,” World Bank President David Malpass said on CNBC’s “Closing Bell” on Tuesday. It seems.”
“China itself is big enough to really drive global demand and supply,” he said.
“A question for the world will be what does it do the most – if it puts upward pressure on global demand, it raises commodity prices. But it also means that the Fed will be hiking for a long time,” he said.