High interest rates, the fallout from Russia’s invasion of Ukraine, and the continued impact of the coronavirus epidemic are all likely to have a significant negative impact on the global economy this year.
The World Bank headquarters in Washington, DC, as seen on Monday, April 5, 2021 (file photo) Due to rising interest rates, the fallout from Russia’s invasion, and other factors, the global economy is expected to contract significantly this year.
THE NATIONAL CAPITAL REGION — High interest rates, the fallout from Russia’s invasion of Ukraine, and the continued impact of the coronavirus epidemic are all likely to have a significant impact on the global economy this year, causing it to slow down significantly.
The anti-poverty organisation World Bank predicts that growth in the global economy will slow to 2.1% in 2023, down from 3.1% in 2022.
The head economist of the World Bank, Indermit Gill, told reporters on Tuesday that the findings were “another gloomy report.” According to him, the financial institution anticipates “a sharp and synchronised slowdown to continue into this year.”
A third of the developing world “will not meet the per-capita income level that they had at the end of 2019,” he warned.
The newest Global Economic Prospects report from the bank is an improvement over their January prediction. According to their forecast, global GDP growth will be a meagre 1.7% in 2018.
In response to a revival of inflation brought on by a stronger-than-expected recovery from the global recession, ongoing supply constraints, and oil and food price shocks induced by the Ukraine war, the Federal Reserve and other major central banks have been rapidly hiking interest rates.
The World Bank projects that growth will pick up to 2.4% in 2024, despite the fact that the global economy has shown unexpected durability in the face of increased borrowing costs.
Despite the Federal Reserve raising their benchmark rate 10 times in the past 15 months, the United States has continued to create unexpectedly solid job increases, with companies adding 339,000 people in May. The World Bank revised its prediction for U.S. economic growth this year upward, to 1.1%, in a study released on Tuesday. Despite its lacklustre performance, this is more than twice as much expansion as the World Bank predicted in January.
A growth rate of 0.4% is projected for the Eurozone this year, which consists of the 20 countries that use the euro as their common currency. Even that constitutes a minor improvement. The World Bank predicted in January that the eurozone would see zero growth this year. With energy costs soaring due to the conflict in Ukraine, Europe was relieved when an unusually mild winter cut back on heating needs.
After China’s leadership relaxed strict zero-COVID measures that had stifled tourism and harmed the economy toward the end of last year, the World Bank raised its forecast for 2023. The second-largest economy in the world is projected to expand by 5.6% in 2023, up from 3% in 2022. The World Bank predicts a slowing of Japan’s economy this year to 0.8%, down from 1% in 2022. It predicts a drop in India’s growth rate to a still-impressive 6.3% from the 7.2% recorded in 2017.
The bank projects a significant slowdown in international trade this year. It predicts that commodity prices, including those for energy, will fall significantly this year and next.