The World Bank slashed its outlook for worldwide economic growth this year, and warned that it would not take much to tip the global economy into a recession.
The bank now projects global gross domestic product (GDP) will increase 1.7%, down from its earlier estimate of 3%. It also reduced its guidance for 2024 to a gain of 2.7%.
- The World Bank slashed its estimate for world GDP in 2023 from 3% to 1.7%.
- U.S. GDP is expected to rise just 0.5% in 2023, the weakest forecast in three decades.
- Elevated inflation, higher interest rates, reduced investment, and the impacts of Russia’s invasion of Ukraine were cited as reasons for the revised estimates.
The World Bank predicts that U.S. GDP might only rise 0.5% this year, 1.9 percentage points below its previous forecast and the weakest performance outside of recessions since 1970.
The group pointed to elevated inflation, high interest rates, reduced investment, and the impacts of Russia’s invasion of Ukraine for the cut in its outlook.
In addition, the bank said because of the “fragile economic conditions,” any new adverse development, such as higher-than-expected inflation, abrupt jumps in interest rates to control it, a resurgence of COVID-19 cases, or escalating geopolitical tensions, could trigger a recession. It noted that if that happens, it would be the first time in more than 80 years that two recessions occurred in the same decade.
World Bank Group President David Malpass indicated emerging and developing nations are especially at risk of slowing growth “as global capital is absorbed by advanced economies faced with extremely high government debt levels and rising interest rates.”