World Bank: Global Economy ‘Perilously Close’ to Recession

The World Bank warned on Tuesday that the global economy will come "perilously close" to a recession in 2023, led by weaker growth in all the world's top economies — the United States, Europe, and China.

World Bank: Global Economy ‘Perilously Close’ to Recession
Image credit: Reuters [via Al Jazeera]

Facts

  • The World Bank warned on Tuesday that the global economy will come "perilously close" to a recession in 2023, led by weaker growth in all the world's top economies — the United States, Europe, and China.
  • The World Bank predicts that growth for 2023 will be 1.7%, down from its previous projection of 3%. If accurate, this would make it the third-weakest annual expansion in three decades — trailing only the recessions that resulted from the 2008 financial crisis and the start of the COVID pandemic in 2020.
  • The World Bank report identified several factors stemming from Russia's invasion of Ukraine and the pandemic. The report noted higher interest rates as a key challenge for policymakers to overcome, and that the US, Eurozone, and China were "undergoing a period of pronounced weakness."
  • The Bank's June prediction of 1.9% growth for the Eurozone this year was revised downward to 0%. The report also noted that Sub-Saharan Africa — where 60% of the world's extremely poor live — was expected to see a growth rate of just 1.2%, which could cause poverty rates to rise rather than fall.
  • World Bank President David Malpass expressed concern Tuesday about the potential of a global economic slowdown. He cited the compounding impact of the Russia-Ukraine war and the impact on developing economies, suggesting "access to electricity, fertilizer, food and capital is likely to remain limited for a prolonged period."
  • Energy prices are expected to fall in 2023 due to an increase in production and decreased demand in Europe, though some price spikes are still possible. Crop prices are also expected to fall 5% this year but will still be higher than they were a few years ago, having risen 13% in 2022.

Sources: Al Jazeera, ABC, Archive, Brussels Times, Daily Sabah, and BBC News.

Narratives

  • Pro-establishment narrative, as provided by World Bank. Economic activity is decreasing sharply because of tight monetary policies intended to contain high inflation and other factors, such as less favorable financial conditions and disruptions caused by Russia's invasion of Ukraine. The outlook has some downside risks. These include higher inflation, even tighter monetary policy, financial stress, and rising geopolitical tensions. To mitigate these risks, policymakers will be focusing on reforms that support growth and bolster the resilience of vulnerable groups.
  • Establishment-critical narrative, as provided by CNN. Is a declining economy the end of the world? A 2 or 3% annual increase in the global economy is a substantial amount of growth over time. At 2% growth annually, the economy would grow more than seven times in a century — putting the emissions goals necessary to curb climate change out of reach. Emissions must decline steeply and fast. Perhaps we should consider "degrowth" by advocating for a universal basic income, shorter work weeks, and easing consumption.