developing countries will experience a sharp and long-term slowdown in activity

In 2023, global growth will fall to 1.7%, from a rate of 3% forecast six months ago

WASHINGTON, January 10, 2023 – According to the last one Global Economic Outlook published by the World Bank, growth has slowed significantly due to inflation, rising interest rates, reduced investment and disruption caused by Russia’s occupation of Ukraine.

Given the uncertain economic situation, any new adverse developments – such as higher-than-expected inflation, a sharp rise in interest rates to curb it, a resurgence of the COVID-19 pandemic or an escalation of geopolitical tensions t- can push the world economy into recession. It would be the first time in over 80 years that two global recessions have occurred in the same decade.

Growth in the world economy is expected to be 1.7% in 2023, then 2.7% in 2024. A marked and widespread slowdown is forecast, with forecasts revised downwards for 95% of advanced economies and almost 70% of emerging markets and economies in progress.

Over the next two years, the growth of per capita income in these economies is expected to average 2.8%, i.e. one percentage point less than the average recorded in the period 2010-2019. In sub-Saharan Africa, which is home to about 60% of the world’s people living in extreme poverty, per capita income growth for 2023-2024 is expected to average just 1.2%, which risks leading to an increase of poverty.

“The crisis threatening development is deepening as global growth prospects deteriorate, stated President of the World Bank Group, David Malpass. Emerging and developing economies have experienced sluggish growth for several years due to high debt and insufficient investment, as global capital is absorbed by developed economies facing extremely high levels of public debt and rising interest rates. . Weak growth and business investment will compound the already devastating bottlenecks in education, health, poverty reduction and infrastructure, as well as the imperatives of climate change. »

Growth in advanced economies is expected to fall from 2.5% in 2022 to 0.5% in 2023. Over the past two decades, slowdowns of this magnitude were the harbinger of a global recession. In the United States, growth is expected to decline to 0.5% in 2023; this rate, 1.9 percentage points lower than previous forecasts, will be the weakest performance recorded by this country since 1970, excluding official episodes of recession. In 2023, growth in the euro area is expected to be zero, corresponding to a downward revision of 1.9 percentage points. Meanwhile, China is expected to grow by 4.3% in 2023, 0.9 points less than previous forecasts.

Excluding China, growth in emerging markets and developing economies is expected to decelerate from 3.8% in 2022 to 2.7% in 2023, due to significantly weaker external demand combined with high inflation, depreciation of monetary conditions, tighter funding and other internal difficulties.

By the end of 2024, GDP levels in emerging and developing economies will remain about 6% lower than pre-pandemic projections. Moreover, while global inflation is likely to moderate, it will remain above pre-COVID levels.

The report further provides the first comprehensive assessment of the medium-term outlook for investment growth in emerging markets and developing economies. During the period 2022-2024, gross investment in these countries is expected to grow by an average of about 3.5%, less than half the rates observed over the previous two decades. The report also suggests options for policymakers to accelerate investment growth.

“The low level of investment is very worrying because it is associated with a low level of productivity and trade and darkens the overall economic outlook. Without strong and sustained growth in investment, it is simply impossible to make meaningful progress in achieving development and climate change objectives.noted Ayhan Kose, Director of the World Bank’s Outlook Unit. Policies to stimulate investment must be tailored to national circumstances, but always begin with the establishment of sound fiscal and monetary frameworks and the implementation of comprehensive investment climate reforms. »

The report also highlights the specific difficulties of 37 small states, countries with a population of 1.5 million or less that have experienced a greater slowdown and a much more limited recovery than other economies after the pandemic, in part due to prolonged disruptions of tourism. In 2020, economic output in small states fell by more than 11%, seven times more than in other emerging and developing economies. The report finds that these countries often experience disaster-related losses that average around 5% of GDP per year, posing a serious obstacle to their economic development.

Their politicians can improve long-term growth prospects by building resilience to climate change, encouraging genuine economic diversification and improving the efficiency of public administrations. The report calls on the international community to help small states by maintaining official aid flows needed to support climate change adaptation and help restore debt sustainability.

Download it Global Economic Outlook (report will be available starting January 10, 2023 at 9:30 a.m., Washington time)

Regional view:

East Asia and the Pacific : Growth should recover to an average of 4.3% in 2023 and 4.9% in 2024. For more information, consult regional synthesis (i).

Europe and Central Asia: The region’s economy is expected to contract by 0.1% this year and then settle at 2.8% in 2024. For more information, see regional synthesis (i).

Latin America and the Caribbean: Growth is expected to slow to 1.3% in 2023 before picking up to 2.4% in 2024. For more information, see regional synthesis (i).

Middle East and North Africa: Growth is expected to slow to 3.5% in 2023 and 2.7% in 2024. For more information, see regional synthesis.

South Asia: Growth is expected to slow to 5.5% in 2023 before picking up slightly to 5.8% in 2024. For more information, see regional synthesis (i).

Sub-Saharan Africa: Growth is expected to moderate to 3.6% in 2023, then pick up to 3.9% in 2024. For more information, see regional synthesis.

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