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.
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% 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.