Global Economy staring at two recessions in same decade

January 11, 2023

The global economy will come “perilously close” to a recession this year, led by weaker growth in all the world’s top economies the United States, Europe and China the World Bank warned on Tuesday. In an annual report, the World Bank, which lends money to poorer countries for development projects, said it had slashed its forecast for global growth this year by nearly half, to just 1.7%, from its previous projection of 3%.

If that forecast proves accurate, it would be the third-weakest annual expansion in three decades, behind only the deep recessions that resulted from the 2008 global financial crisis and the coronavirus pandemic in 2020.

Though the United States might avoid a recession this year the World Bank predicts the US economy will eke out growth of 0.5% – global weakness will likely pose another headwind for America’s businesses and consumers, on top of high prices and more expensive borrowing rates. The United States also remains vulnerable to further supply chain disruptions if COVID-19 keeps surging or Russia’s war in Ukraine worsens.

And Europe, long a major exporter to China, will likely suffer from a weaker Chinese economy.

The World Bank report also noted that rising interest rates in developed economies like the United States and Europe will attract investment capital from poorer countries, thereby depriving them of crucial domestic investment. At the same time, the report said, those high interest rates will slow growth in developed countries at a time when Russia’s invasion of Ukraine has kept world food prices high.