WASHINGTON ( Associated Press) – Weak growth in major economies – the United States, Europe and China – will push the world economy “dangerously close” to recession this year – the World Bank warned Tuesday.
In its annual report, the World Bank, which lends to poor countries for development projects, cut its global growth forecast by almost half from its previous estimate of 3%. If the forecast is confirmed, it would be the third-smallest annual growth in three decades, after the global financial crisis in 2008 and the recession caused by the pandemic in 2020.
Although the United States may avoid recession this year — the World Bank predicts growth of just 0.5% — in addition to high inflation and high interest rates, weakness in the rest of the world will challenge American businesses and consumers. In addition, the country remains vulnerable to disruption of supply chains if COVID continues to spread or the war in Ukraine worsens.
For its part, Europe, a major exporter to China, will likely bear the consequences of a weaker economy in the Asian country.
The World Bank report also states that high interest rates in advanced economies such as the United States and Europe are likely to attract investment from poorer countries, thereby depriving them of significant domestic investment. At the same time, the report says, higher interest rates will slow economic growth in developing countries at a time when Russia’s invasion of Ukraine is causing food prices to rise.
The impact will be particularly hard on poor countries such as sub-Saharan Africa, where average per capita income is expected to increase by only 1.2% in 2023 and 2024, according to the World Bank. This is such a low figure that the poverty rate may rise.
“Weakened growth and business investment will exacerbate already devastating impacts on education, health, poverty and infrastructure and climate change-based demands,” said David Malpass, World Bank President.