World Bank Global Growth Forecast
Executive summary
A. The World Bank has revised its global growth
projections for 2023 and 2024 in its latest Global Economic Prospects report.
B. The bank expects the global economy to grow by
2.1% in 2023, up from 1.7% forecast in January, driven by
stronger-than-expected recoveries in the U.S., China and other major economies.
C. However, the bank has lowered its 2024 global
growth forecast to 2.4% from 2.7%, citing the negative effects of tighter
monetary policy and credit conditions on investment and consumption.
D. The bank warns that 2023 will still be one of
the slowest growth years for advanced economies in the last five decades, and
that two thirds of developing economies will see lower growth than in 2022.
E. The bank also highlights the risks of banking
sector stress, pandemic resurgence, geopolitical tensions and climate shocks
that could derail the global recovery.
The World Bank is a multilateral
development institution that provides financial and technical assistance to
developing countries. The bank publishes its Global Economic Prospects report
twice a year, which analyzes the trends and challenges facing the global
economy and provides forecasts for various regions and countries.
The latest report, released on June
6, 2023, covers the period from 2022 to 2025 and reflects the latest data and
developments related to the COVID-19 pandemic and its aftermath. The report
also discusses the implications of higher interest rates and tighter financial
conditions for global growth and development.
The main purpose of this report is
to summarize the key findings and messages of the World Bank's report and to
provide a detailed business update on the global economic outlook for 2023 and
2024.
Global growth outlook for 2023
The World Bank has raised its
global growth forecast for 2023 to 2.1%, up from 1.7% projected in January.
This upward revision reflects the stronger-than-expected performance of some
major economies, especially the U.S. and China, which have benefited from
large-scale fiscal stimulus, rapid vaccination progress and easing of lockdown
measures.
According
to the World Bank, the U.S. economy is expected to grow by 1.1% in 2023,
more than double the 0.5% forecast in January, as consumer spending, business
investment and exports rebound from the pandemic-induced slump. China's economy
is projected to expand by 5.6% in 2023, up from 4.3% forecast in January, as
industrial production, domestic demand and external trade recover from the
COVID-19 shock.
Other advanced economies are also
expected to see improved growth prospects in 2023, albeit at a more modest
pace. The euro zone is forecast to grow by 0.4% in 2023, up from a flat outlook
in January, as vaccination campaigns accelerate and fiscal support measures
continue. Japan's economy is expected to grow by 0.6% in 2023, up from 0.4%
forecast in January, as consumer confidence and business sentiment improve.
However, not all regions and
countries are experiencing a robust recovery. The World Bank notes that many
emerging market and developing economies (EMDEs) are still facing significant
challenges from the pandemic, such as limited access to vaccines, weak health
systems, high debt burdens, social unrest and political instability.
The
World Bank estimates that about one-third of EMDEs will not regain their
pre-pandemic per capita income levels by the end of next year. Sub-Saharan
Africa is expected to grow by only 0.8% in 2023, down from 1.2% forecast in
January, as low commodity prices, fiscal constraints and security issues weigh
on growth prospects. Latin America and the Caribbean is projected to grow by
only 0.9% in 2023, down from 1.4% forecast in January, as political
uncertainty, social tensions and weak external demand hamper recovery efforts.
Global growth outlook for 2024
The World Bank has lowered its
global growth forecast for 2024 to 2.4%, down from 2.7% projected in January.
This downward revision reflects the expected impact of tighter monetary policy
and credit conditions on investment and consumption across regions and countries.
The World Bank anticipates that
central banks in advanced economies will start to raise interest rates and
reduce asset purchases in response to rising inflation pressures and output
gaps. This will lead to higher borrowing costs and lower credit availability
for businesses and households, especially in EMDEs that rely on external
financing.
The World Bank estimates that a 100
basis point increase in the policy rate of the U.S. Federal
Reserve would reduce global growth by 0.4 percentage point in 2024. The
bank also warns that banking sector stress, which has increased during the
pandemic due to rising non-performing loans and lower profitability, could
trigger a severe credit crunch and broader financial market turmoil in some
countries.
The World Bank expects the U.S.
economy to grow by only 0.8% in 2024, down from 1.6% forecast in January, as
higher interest rates and tighter fiscal policy dampen domestic demand. China's
economy is projected to grow by 4.6% in 2024, down from 5% forecast in January,
as monetary policy normalization and structural reforms slow down credit growth
and investment.
Other advanced economies are also
expected to see lower growth rates in 2024 compared to 2023. The euro zone is
forecast to grow by only 0.2% in 2024, down from 0.5% forecast in January, as
fiscal stimulus fades and trade tensions with the U.S. and China persist.
Japan's economy is expected to grow by only 0.3% in 2024, down from 0.5%
forecast in January, as population aging and labor shortages constrain potential
growth.
The World Bank projects that two
thirds of EMDEs will see lower growth rates in 2024 than in 2023. Sub-Saharan
Africa is expected to grow by only 0.6% in 2024, down from 0.9% forecast in
January, as structural bottlenecks, climate shocks and conflict risks limit
growth potential. Latin America and the Caribbean is projected to grow by only
0.7% in 2024, down from 1% forecast in January, as weak productivity, high
inequality and social discontent undermine confidence and investment.
Risks and uncertainties
The World Bank cautions that the
global economic outlook is subject to significant risks and uncertainties, both
on the upside and downside. On the upside, faster-than-expected vaccination
progress, stronger-than-expected fiscal stimulus, and greater-than-expected
policy coordination could boost global growth and development outcomes.
On the downside, however, the World
Bank identifies several potential sources of disruption that could derail the
global recovery, such as:
1. A
resurgence of COVID-19 cases and variants that could overwhelm health systems
and prompt renewed lockdowns and mobility restrictions.
2. A
disorderly tightening of financial conditions that could trigger capital
outflows, currency depreciations, debt distress and financial instability in
EMDEs.
3. A
worsening of geopolitical tensions and trade disputes that could disrupt global
supply chains, reduce trade flows and increase protectionism.
4. A
failure to address climate change and environmental degradation that could
increase the frequency and severity of natural disasters, damage infrastructure
and livelihoods, and exacerbate poverty and inequality.
The World Bank urges policymakers
to take decisive actions to mitigate these risks and support a sustainable and
inclusive recovery. The bank recommends that policymakers:
a) Accelerate
the production and distribution of vaccines and ensure equitable access for all
countries.
b) Maintain
adequate fiscal and monetary support until the recovery is firmly entrenched,
while ensuring debt sustainability and financial stability.
c) Enhance
international cooperation and coordination on trade, debt relief, climate
action and development assistance.
d) Implement
structural reforms to boost productivity, competitiveness, innovation and
resilience.
Conclusion
The World Bank's latest Global
Economic Prospects report provides a detailed business update on the global
economic outlook for 2023 and 2024. The report shows that the global economy is
recovering from the COVID-19 pandemic at an uneven pace across regions and
countries.
The report highlights that some
major economies, such as the U.S. and China, have performed better than
expected in 2023, thanks to large-scale fiscal stimulus, rapid vaccination
progress and easing of lockdown measures. However, the report also warns that
many emerging market and developing economies are still facing significant
challenges from the pandemic, such as limited access to vaccines, weak health
systems, high debt burdens, social unrest and political instability.
The report projects that global
growth will slow down in 2024 due to the negative effects of tighter monetary
policy and credit conditions on investment and consumption. The report also
cautions that the global economic outlook is subject to significant risks and
uncertainties, both on the upside and downside.
The report urges policymakers to
take decisive actions to mitigate these risks and support a sustainable and
inclusive recovery. The report recommends that policymakers accelerate the
production and distribution of vaccines, maintain adequate fiscal and monetary
support, enhance international cooperation and coordination, and implement
structural reforms.
References
(1) World Bank cuts 2024 global growth
forecast as rate hikes bite but lifts 2023 outlook.
https://www.msn.com/en-ca/money/topstories/world-bank-cuts-2024-global-growth-forecast-as-rate-hikes-bite-but-lifts-2023-outlook/ar-AA1ccuvc.
(2) World Bank Lifts 2023 Global
Growth Forecasts, But Cuts Next Year's Outlook.
https://www.voanews.com/a/world-bank-lifts-2023-global-growth-forecasts-but-cuts-next-year-outlook/7125022.html.
(3) World Bank lifts global growth
forecasts, cuts 2024’s outlook. https://www.freemalaysiatoday.com/category/business/2023/06/06/world-bank-lifts-global-growth-forecasts-cuts-2024s-outlook/.
(4) World Bank cuts 2024 global
growth forecast as rate hikes bite but ....
https://www.reuters.com/markets/world-bank-lifts-2023-global-growth-forecasts-cuts-next-years-outlook-2023-06-06/.
(5) World Bank cuts 2024 global
growth forecast as rate hikes bite but ....
https://news.yahoo.com/world-bank-lifts-2023-global-133950872.html.
No comments :