world bank
In its latest report, “Global Economic Prospects,” the World Bank raised its forecast for global economic growth this year to 2.1 percent from 1.7 percent in a January forecast, compared with an earlier forecast of 3.1 percent. The economy in 2021.
The bank revised that forecast to 2% at its spring meeting, according to former World Bank President David Malpass.
The bank also revised its forecast for the global economy in 2024 to 2.4%, compared with its previous forecast of 2.7% in January.
The World Bank said in the report that global economic growth has slowed sharply, global interest rates have risen, and the risk of financial stress in emerging markets and developing economies has intensified.
For emerging market and developing economies excluding China, the report expects growth to slow to 2.9 percent this year, from 4.1 percent last year. The forecast reflects a broad decline.
In response, World Bank Group President Ajay Banga commented, “The surest way to reduce poverty and spread prosperity is to boost employment, as slower growth makes job creation harder. This is a turnaround. opportunity, but we all need to work together to make it happen.”
The bank believes that so far most emerging market and developing economies have suffered limited damage from recent banking stress in advanced economies, but according to the bank’s description, these economies are currently navigating dangerous waters .
A quarter of emerging market and developing economies have effectively lost access to international bond markets given tightening global credit conditions, the World Bank said.
These pressures are particularly acute for emerging market and developing economies, which have underlying vulnerabilities such as low creditworthiness.
Growth forecasts for these economies in 2023 are less than half of what they were a year ago, making them highly vulnerable to additional shocks, the bank highlighted.
Commenting on the report, Indremit Gill, Chief Economist and Senior Vice President of the World Bank Group, said: “The global economy is in a precarious state, and with the exception of East and South Asia, we have a long way to go to reach Eradicate poverty, fight climate change and recover the dynamism needed to build human capital Trade is expected to grow at less than a third of pre-pandemic years in 2023 Emerging market and developing economies are facing mounting debt stress , because fiscal vulnerability to high interest rates has pushed many “from low-income countries” into debt, the financing needs of achieving the Sustainable Development Goals far exceed even the most optimistic private investment forecasts. “
The World Bank confirmed that multiple shocks including the COVID-19 pandemic, the crisis in Ukraine, and a sharp economic slowdown resulting from tightening global financial conditions have resulted in prolonged setbacks to development efforts in emerging markets and developing economies, which are likely to persist for the foreseeable future.
As a result, the bank expects economic activity in these economies to be around 5% below pre-pandemic levels by the end of 2024.
The losses are greatest in low-income countries, especially the poorest, the World Bank said. Of these countries, more than a third will have per capita income in 2024 below its 2019 level.
This slow pace of income growth could exacerbate extreme poverty in many low-income countries.
“Many developing economies are struggling to adjust to weak growth rates, persistently high inflation and record debt levels,” said Ihan Kose, deputy chief economist at the World Bank Group. Spillover effects – this could make them worse… Policymakers in these economies must act urgently to prevent contagion from the financial crisis and reduce domestic vulnerabilities in the short term. “
developed economies
As for advanced economies, the report slightly raised its forecast for these economies to 0.7% from the 0.5% estimated in January, but lowered their growth forecast for these economies to 1.2% from 1.7% in 2024. A slowdown from 2.6% in 2022.
The bank also raised its 2023 forecast for the U.S. economy to 1.1% from 0.5% in January, but halved its 2024 forecast for the world’s largest economy to 0.8% from 1.6%, largely due to Ongoing impact Interest rates have risen sharply over the past year and a half.
The same is true for expectations in the euro zone, where the bank raised its 2023 forecast to 0.4% and cut its 2024 forecast to 1.3% from 1.6% after keeping its forecast at 0% in January. The bank attributed this to the delayed effect of policy tightening, with higher currency and energy prices.
US interest rates
The report also analyzes rising U.S. interest rates and their impact on emerging market and developing economies.
The rise in two-year Treasury yields over the past year and a half has been largely driven by investors’ expectations of tighter U.S. monetary policy to keep inflation in check, the bank said.
According to the report, this particular type of rate hike is associated with negative financial impacts in emerging market and developing economies, including a higher likelihood of a financial crisis.
Furthermore, the Bank found that these effects were more pronounced in countries with greater economic vulnerability.
high risk economy
Especially in high-risk and emerging market transactions, banks refer to countries with underdeveloped financial markets and limited access to global capital, these markets often see greater increase in borrowing costs, such as higher sovereign high-risk or new markets The risk margin is more than three times higher than that of other emerging market and developing economies.
low-income economies
According to the World Bank, low-income economies are currently facing a dilemma as high interest rates exacerbate the deterioration of public finances over the past decade.
The average public debt in these countries is now about 70% of their GDP, and debt interest payments represent an increasing proportion of their limited government revenues.
The report showed that 14 low-income countries were already in debt distress, or were at high risk of being in debt distress, and spending pressures in these economies had increased significantly.
Adverse shocks, such as extreme weather events and conflict, are more likely than anywhere else to leave households in financial hardship in low-income countries where social safety nets are weak.
On average, these countries spend 3 percent of their GDP on their poorest citizens, well below the 26 percent average among developing economies, the World Bank found.