World Bank: Global economy could see second recession of the decade

London CNN –

The global economy is just one more shot away from a second recession in the same decade, something that hasn’t happened in more than 80 years.

This is the latest warning from the World Bank, which on Tuesday sharply lowered its forecast for global economic growth.

The group now forecasts that the world economy will expand by just 1.7% this year, hitting developing countries that have already been hit hard by the pandemic and rising interest rates. It predicts that growth will increase to 2.7% in 2024.

“The crisis facing development is intensifying as the global growth outlook worsens,” World Bank President David Malpass said in a statement.

Elevated inflation, aggressive central bank policy, worsening financial conditions and shock waves from Russia’s invasion of Ukraine are all weighing on growth.

As a result, “further negative shocks” – from higher inflation and even tighter monetary policy to increased geopolitical tensions – could be enough to trigger recessionary conditions, according to the World Bank.

The global economy shrank by 3.2% during the pandemic recession of 2020, before rebounding strongly in 2021. The world last experienced two recessions in the same decade in the 1930s.

The organization said it expects the US economy to grow by just 0.5% in 2023. The 20 countries that use the euro, which have been hit by the war in Ukraine, are not expected to see any overall expansion. Both forecasts are much lower than they were in June 2022.

Growth in China is forecast to pick up in 2023 after the lifting of Covid-19 restrictions, rising to 4.3%. But that forecast is also down from six months ago, reflecting continued volatility in the country’s real estate market, weaker demand from other countries for Chinese-made products and ongoing pandemic disruptions.

“The world’s three main engines of growth – the United States, the Eurozone and China – are going through a period of marked weakness,” the World Bank said in its report.

This withdrawal will also hurt poorer countries, which have already felt the effects of an uncertain economic climate, lower business investment and rising rates. Rising borrowing costs can make it more challenging to cope with high levels of debt.

By the end of 2024, economic output in emerging markets and developing economies will be about 6% below pre-pandemic levels, according to the World Bank. Income growth is also expected to be slower than the average in the pre-Covid decade, making it harder to close the gap with wealthier nations.