(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 per cent, from its previous projection of 3 per cent.
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 US economy will eke out growth of 0.5 per cent, 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.
The impact of a global downturn would fall particularly hard on poorer countries in such areas as Saharan Africa, which is home to 60 per cent of the world’s poor. The World Bank predicts per capita income will grow just 1.2 per cent in 2023 and 2024, which is such a tepid pace that poverty rates could rise.