The Washington-based lender said Tuesday that the global gross domestic product will likely grow 1.7% this year, which is almost half the rate predicted in June. In the past thirty years or more, that would be the third-worst result, behind the recessions of 2009 and 2020.
The World Bank cut its growth projections for the majority of the nations and regions and issued a warning that fresh negative shocks might push the world economy into a recession.
According to the Washington-based lender, the global gross domestic product will likely grow by 1.7% this year, which is almost half the rate predicted in June. In the past thirty years or more, that would be the third-worst result, behind the recessions of 2009 and 2020.
The bank reduced its growth projections for 2024 and cited persistent inflation and increased interest rates as two of the main causes. Additionally, a drop in investment and the effects of Russia’s invasion of Ukraine were mentioned.
In his prologue to the World Bank’s semi-annual Global Economic Prospects report, World Bank President David Malpass stated that “the crisis facing development is growing” and that it is likely that the setbacks to global prosperity would continue. He predicted that the GDP of emerging-market and developing economies will be around 6% lower by the end of 2019 than was anticipated on the eve of the Covid-19 epidemic.
The lender claimed that other challenges faced by poorer countries are being exacerbated by spillovers from a period of notable weakness in the US, China, and the European Union. While inflation is slowing, there are indications that pressures are intensifying and forcing central banks to hike interest rates earlier than anticipated.
The World Bank stated that the combination of poor growth, tightening financial conditions, and high levels of debt “is likely to impair investment and precipitate business bankruptcies.” To reduce the chances of a global recession and debt crisis, urgent global action is required.
Given the restricted amount of policy space, the lender, which is examining its operational model, stated that attention must be paid to the following areas:
- National officials must make sure that vulnerable people receive the majority of any financial assistance.
- Expectations of inflation must continue to be firmly anchored.
- Financial systems need to remain robust.
The World Bank demanded a “significant boost” in investments for poor countries, including fresh money from the international community and the redeployment of current funds, including ineffective fuel and agricultural subsidies.
Malpass stated that there shouldn’t be a place for pessimism even though the globe is currently in a precarious situation. The rule of law could be strengthened, the outlook could be improved, and stronger economies with more vibrant private sectors and better prospects for people could be built.
