World Bank predicts world economy to fall by 2% in 2023

By Luther Animashaun

The World Bank has upgraded its global growth outlook for 2023 from a 1.7 per cent forecast in January to two per cent growth, noting that the global economy is expected to weaken in 2023 from 3.1 per cent in 2022.

David Malpass, president of the World Bank Group, stated this during his opening address at the spring meetings 2023 Media Call.

Malpass attributed  several factors weighing on the second-half outlook, including a combination of weak investment, higher interest rates, and relatively weak growth in the advanced economies.

He added that the economic risk for the period under review was acute due to inflation, currency depreciation, rising debt service costs, and the collapse of international reserves.

“If we look at developing countries excluding China, we expect a slowdown to about 3.1 per cent in 2023 from 4.1 per cent in 2022. The concern in our recent reports is that slow growth will persist for years for many developing countries, increasing the fiscal stress and debt problems,” he said.

Malpass further noted that the diversion of natural gas to Europe presented grave obstacles to developing country production of electricity, fertiliser, and food. These problems, he noted, are severely constraining future growth and deepening inequality and fragility for developing countries.

Malpass said the second major problem was that a narrow group of advanced economies absorbed the available global capital with extremely high government debt levels.

“I will call them sinkholes. To make matters worse, their populations are ageing rapidly, and the peace dividend of the 1990s was used up,” he stated.