By CHRISTOPHER RUGABER
January 10, 2023
FILE - Container cranes at a port in New Jersey appear behind the Statue of Liberty, Sunday, Nov. 20, 2022, in New York. 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 Tuesday.(AP Photo/Julia Nikhinson, File)
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.
https://apnews.com/article/europe-business-china-world-bank-economy-391bd23625e205a0d94c1d1c224892a8
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