The World Bank sees better global economic growth than previously forecast in 2023, due to resilient U.S. consumer spending and China’s recovery from the pandemic earlier this year.
The bank’s forecasts in its latest Global Economic Prospects report highlight the problems that global policymakers face as they try to lower inflation by raising interest rates while still dealing with the aftermath of the pandemic and supply chain disruptions resulting from the war in Ukraine.
The bank still expects slowing growth in the second half of this year and a muted expansion into next year, according to its forecast released Tuesday. It warned that stubbornly high inflation and interest-rate increases are weighing on economic activity around the world, particularly in developing countries, the Wall Street Journal reported.
The bank now projects the world’s economy will grow 2.1% this year, up from the 1.7% pace it forecast in January. The new estimate still marks a slowdown from last year’s 3.1% expansion.
“The global economy remains in a precarious state,” the multilateral lender said in the latest issue of its semiannual report. The bank noted overlapping negative shocks from the pandemic, Russia’s invasion of Ukraine and the sharp tightening of monetary policy.
The bank forecasts growth of 2.4% next year, a pickup from this year, but not as much as its January estimate of 2.7%.
The somewhat improved 2023 outlook is consistent with other data showing the U.S. and much of Europe have so far avoided a recession that many forecasters expected heading into 2023.
Better-than-expected economic performances at the start of the year have helped keep inflation stubbornly high in many advanced economies. As a result, policy makers in the U.S. and other rich nations have continued to raise interest rates to tame inflation. The World Bank says that the impact is felt particularly acutely in many developing nations.
For many lower-income countries, higher rates are crimping growth, slowing investment and intensifying the risk of financial crises, the bank said. Emerging markets and developing economies outside of China are expected to see their growth slow to 2.9% this year from 4.1% last year.
“Besieged by high inflation, tight global markets and record debt levels, many countries are simply growing poorer,” said Indermit Gill, World Bank chief economist.
