Global economic activity is forecast to slow to its third-weakest pace in nearly thirty years, a slowdown that would only be superseded by the 2009 and 2020 global recessions, the World Bank warned this week.
“Investment growth in emerging market and developing economies is predicted to remain below its average rate of the past two decades,” it said in its Global Economic Prospects report. “Any additional adverse shocks could push the global economy into recession.”
The World Bank downgraded its forecast for global growth this year, and now projects global GDP to rise by just 1.7%, a weak pace “overshadowed only by the global recessions caused by the pandemic and the global financial crisis.”
The slowdown reflects rising interest rates around the world as central banks battle high inflation, worsening financial conditions, and continued disruptions from Russia’s invasion of Ukraine.
“The United States, the eurozone, and China are all undergoing a period of pronounced weakness,” the World Bank said, all of which is spilling over and adding to the problems that emerging market and developing economies are dealing with.
The report warned that “the combination of slow growth, tightening financial conditions, and heavy indebtedness is likely to weaken investment and trigger corporate defaults.”
“Further negative shocks — such as higher inflation, even tighter policy, financial stress, deeper weakness in major economies, or rising geopolitical tensions — could push the global economy into recession,” it added.
The World Bank called for urgent measures in the near term to mitigate the risks of global recession and debt distress in emerging and developing economies.
The international financial institution also said more investment in emerging and developing economies will be needed to help reverse the slowdown in long-term growth that was made worse by the pandemic, the invasion of Ukraine, and the rapid rise in interest rates around the world.
“This will require new financing from the international community and from the repurposing of existing spending, such as inefficient agricultural and fuel subsidies,” the World Bank said.
