The World Bank has disclosed fears that “further adverse shocks” could cause the global economy to contract, with smaller countries being especially susceptible in 2023.
The caution is stated in the research’s abstract, which can be seen on the group’s Open Knowledge Repository website, which will be released on Tuesday as part of the bi-annual “Global Economic Prospects” report.
Even without another crisis, the World Bank said that this year’s global economy is anticipated to decline considerably, reflecting synchronized policy tightening aimed at curbing very high inflation, worsening financial conditions, and prolonged disruptions from Russia’s invasion of Ukraine.
The Washington-based lender stated that “urgent global and national efforts” are required to reduce the risk of such a downturn as well as debt distress in emerging market and developing economies (EMDEs), where investment growth is anticipated to remain below the average of the previous two decades.
“It is critical that EMDE policy makers ensure that any fiscal support is focused on vulnerable groups, that inflation expectations remain well anchored, and that financial systems continue to be resilient,” it said.
Comparable demands have been made by central bankers from all over the world as they aggressively boost interest rates to reduce pricing pressures while governments help businesses and people by keeping energy costs in check.
The managing director of the International Monetary Fund, Kristalina Georgieva, warned that 2023 would be “a tough year, tougher than the year we leave behind” for the world.
The US, the EU, and China are all slowing down at the same time, she said in an interview with CBS’s “Face the Nation” that aired on Jan. 1; as a result, one-third of the world economy will be in recession.
