# World Bank warns global economy could easily tip into recession in 2023 Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2023-01-10 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: World Bank slashes 2023 growth forecasts due to central bank Meta Description: Discover how the World Bank's grim predictions highlight a looming global recession amidst central bank rate hikes, Russia's war in Ukraine and URL: https://financedigest.com/world-bank-warns-global-economy-could-easily-tip-into-recession-in-2023html ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-01-10t150350z2lynxmpej090hhrtroptp4new-york-dailylife-1736814595380-compressed.jpg) By David Lawder WASHINGTON (Reuters) – The World Bank slashed its 2023 growth forecasts on Tuesday to levels teetering on the brink of recession for many countries as the impact of central bank rate hikes intensifies, Russia’s war in Ukraine continues, and the world’s major economic engines sputter. The development lender said it now expected global GDP growth of 1.7% in 2023 — the slowest pace outside the 2009 and 2020 recessions in nearly three decades. In its previous Global Economic Prospects report, in June 2022, the [bank had forecast 2023 global](https://www.financedigest.com/credit-suisse-54-billion-lifeline-offers-limited-respite-to-global-banks.html "Credit Suisse billion lifeline offers limited respite to global banks") growth at 3.0% The bank said major slowdowns in advanced economies, including sharp cuts to its forecast to 0.5% for both the United States and the euro zone, could foreshadow a new [global recession less than three years](https://www.financedigest.com/2021-the-year-of-the-global-workforce-for-british-small-businesses.html "2021: The Year of the Global Workforce for British small businesses ") after the last one. Given fragile economic conditions, any new adverse development — such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions — could push the global economy into recession,” the [bank said in a statement accompanying the report](https://www.financedigest.com/how-banks-can-avoid-regulatory-reporting-mistakes-with-a-good-dose-of-automation.html "HOW BANKS CAN AVOID REGULATORY REPORTING MISTAKES WITH A GOOD DOSE OF AUTOMATION"). The bleak outlook will be especially hard on emerging market and developing economies, the World Bank said, as they struggle with heavy debt burdens, weak currencies and income growth, and [slowing business investment that is now forecast at a 3.5% annual growth rate over the next two years — less than half the pace](https://www.financedigest.com/uk-recruiters-slow-pace-of-pay-growth-in-march-rec-survey-shows.html "UK recruiters slow pace of pay growth in March, REC survey shows") of the past two decades. Weakness in growth and [business investment will compound the already devastating reversals in education](https://www.financedigest.com/the-education-of-business-education.html "‘The Education of Business Education’"), health, poverty and infrastructure and the increasing demands from climate change,” World Bank President David Malpass said in a statement. China’s growth in 2022 slumped to 2.7%, its second slowest pace since the mid-1970s after 2020, as zero-COVID restrictions, [property market](https://www.financedigest.com/2017-spanish-property-market-gems-kyero-com-gazes-into-the-crystal-ball.html "2017 Spanish property market gems – Kyero.com gazes into the crystal ball") turmoil and drought hit consumption, production and investment, the World Bank report said. It predicted a rebound to 4.3% for 2023, but that is 0.9 percentage-point below the June forecast due to the severity of COVID disruptions and [weakening external demand](https://www.financedigest.com/global-factory-activity-weakens-as-demand-falters.html "Global factory activity weakens as demand falters"). The World Bank noted that some inflationary pressures started to abate as 2022 drew to a close, with lower energy and commodity prices, but [warned that risks](https://www.financedigest.com/tesla-to-warn-of-data-privacy-risk-from-car-security-cameras-in-germany.html "Tesla to warn of data privacy risk from car security cameras in Germany") of new supply disruptions were high, and elevated core inflation may persist. This could [cause central banks](https://www.financedigest.com/explainer-what-are-credit-default-swaps-and-why-are-they-causing-trouble-for-europes-banks.html "Explainer-What are credit default swaps and why are they causing trouble for Europe’s banks?") to respond by raising policy rates by more than currently expected, worsening the global slowdown, it added. The [bank called for increased support from the international community to help low-income countries deal](https://www.financedigest.com/seven-out-of-ten-uk-adults-aged-25-44-never-seek-advice-on-dealing-with-debts-despite-depending-on-the-bank-of-mum-and-dad.html "Seven out of ten UK adults aged 25-44 never seek advice on dealing with debts despite depending on the bank of mum and dad") with food and energy shocks, people displaced by conflicts, and a growing risk of debt crises. It said new concessional financing and grants are [needed along with the leveraging of private capital and domestic resources to help boost investment in climate](https://www.financedigest.com/analysis-global-climate-coalitions-need-safer-harbour-from-antitrust-turbulence.html "Analysis-Global climate coalitions need safer harbour from antitrust turbulence") adaptation, human capital and health, the report said. The report [comes as the World](https://www.financedigest.com/whats-coming-next-in-the-clearing-and-settlement-world.html "What’s coming next in the clearing and settlement world?") Bank’s board this week is expected to consider a new “evolution road map” for the institution to vastly expand its lending capacity to address climate change and other global crises. The plan will guide negotiations with shareholders, led by the United States, for the biggest revamp in the [bank’s business](https://www.financedigest.com/credit-agricole-launches-china-ma-and-investment-banking-business.html "Credit Agricole launches China M&A and investment banking business") model since its creation at the end of World War Two. (Reporting by David Lawder; Editing by Leslie Adler) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---