The World Bank issued a warning amid rising inflation and interest rates that a second global recession in a decade may be on the horizon.
The institution’s Global Economic Prospects study predicts that global GDP would increase by just 1.7% this year, down from a previous prediction of 3%.
Global Economy Could Tip Into Recession
The ‘fragile’ global economy might enter a recession if there are any more setbacks, such as higher-than-expected inflation or interest rates, a COVID-19 revival, or increased international tensions, it said.
Following a recession in 2020, this would be the first time since the Second World War when two worldwide downturns occurred in the same decade.
The depressing picture comes as the globe struggles to deal with the effects of the conflict in Ukraine, tensions between China and Taiwan, and China’s messy transition out of a protracted state of lockdown.
Due to the spiraling cost of living caused by Russia’s invasion last year, consumers in the West are still feeling the pinch.
Britain, America, and Europe are raising interest rates to combat decades-high inflation, which is hurting borrowers and slowing down economic development.
David Malpass, the president of the World Bank, cautioned that while wealthy countries hoard money and poorer countries struggle with debilitating debt levels, a crisis will only worsen for them.
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World Bank Report
The already-devastating reversals in education, health, poverty, and infrastructure that many have experienced as a result of the pandemic as well as the mounting pressures brought on by climate change will be exacerbated by this.
The World Bank reported that it has lowered its projections for 95% of advanced economies as well as roughly 70% of emerging markets and developing countries.
The US is expected to see its worst growth outside of formal recessions since 1970 in 2023 when it is expected to dip to 0.5%. Additionally, an earlier prediction for 1.9% growth in the eurozone has been lowered to zero.
GDP growth for advanced nations as a whole is projected to be just 0.5%, a dramatic decline from 2.5% in 2022.
The impact would be especially severe in areas like sub-Saharan Africa, which is home to 60% of the world’s poor, where poverty reduction has already come to a grinding halt and access to energy, fertilizer, food, and money is likely to stay restricted for a considerable period.
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