The World Bank projects that the global economy may slow dramatically this year, hampered by high interest rates, the fallout from Russia's invasion of Ukraine, and the lingering impacts of the coronavirus outbreak.
According to the World Bank, a 189-country anti-poverty organization, the global economy would rise by only 2.1 percent in 2023, down from 3.1 percent in 2022. Still, the bank's current Global Economic Outlook report, released on Tuesday, represents an improvement above its prior projection in January. This year, the prediction predicted only 1.7 percent global growth.
The Federal Reserve and other major central banks have aggressively raised interest rates in order to combat a resurgence of inflation, which has been triggered by a stronger-than-expected recovery from the pandemic recession, persistent supply shortages, and energy and food price shocks caused by the Ukraine war.
Nonetheless, in the face of increased borrowing rates, the global economy has been unexpectedly durable, and the World Bank projects that growth will rise to 2.4 percent in 2024.
Despite the Fed raising its benchmark rate ten times in the last 15 months, the United States has continued to create unexpectedly significant job increases – companies added 339,000 people in May, considerably more than experts had predicted. The World Bank raised its prediction for US economic growth this year to 1.1 percent in its report on Tuesday. Notwithstanding its weakness, this is more than double the growth forecast by the World Bank in January.
The eurozone, which includes the 20 nations that use the euro currency, is predicted to increase by 0.4 percent this year. This, however, is a tiny improvement: the World Bank had predicted no growth in the eurozone this year in January. Europe, which was suffering from higher energy prices as a result of the Ukrainian war, benefited from a relatively mild winter, which lowered demand for heat.
The World Bank raised its forecast for China to 2023 after Beijing softened its stringent zero-COVID restrictions late last year, which had limited travel and harmed the Chinese economy. The world's second-largest economy is predicted to grow at a rate of 5.6 percent in 2023, up from 3 percent last year. According to the World Bank, Japan's growth would slow to 0.8 percent this year from 1 percent in 2022. It forecasts India's growth to fall to 6.3 percent from 7.2 percent last year.
According to the bank, global commerce will decline significantly this year. The price of energy and other commodities is expected to fall sharply this year and next.