World Bank: Second global recession may be looming

A SECOND global recession in a decade may be looming amid surging inflation and interest rates, the World Bank warned.

Worldwide GDP is set to grow by just 1.7 per cent this year, down from a past forecast of 3 per cent, according to the institution’s Global Economic Prospects report.

Any further setbacks – such as higherthanexpected inflation or interest rates, a Covid resurgence, or further global tensions – could tip the ‘fragile’ world economy into recession, it said.

This would mark the first time since the Second World War that two global downturns have happened in the same decade – following a recession in 2020.

The gloomy outlook comes as the world continues to wrestle with the fallout from war in Ukraine, tensions between China and Taiwan as well as China’s chaotic emergence from a prolonged period of lockdowns.

Russia’s invasion last year prompted an energy and food price spiral, creating a cost of living crunch still squeezing consumers in the West.

Britain, America and Europe are battling decades-high levels of inflation by ratcheting

‘Devastating for poorest nations’

up interest rates, causing even more pain for borrowers and hobbling economic growth.

World Bank president David Malpass warned poorer countries in particular face an intensifying crisis as they struggle with crippling debt levels and richer nations hoard cash.

This will compound the ‘already-devastating reversals in education, health, poverty, and infrastructure’ many have suffered due to the pandemic as well as increasing pressures caused by climate change.

The World Bank said it has downgraded its forecasts for 95 per cent of advanced economies and nearly 70 per cent of emerging markets and developing nations.

In the US, growth is forecast to slow to 0.5 per cent in 2023 – its weakest performance outside official recessions since 1970. And for the eurozone, a previous forecast for 1.9 per cent growth has been revised down to zero.

For advanced economies in general, GDP is set to rise by just 0.5 per cent, down sharply from 2.5 per cent in 2022.

‘Over the past decade, slowdowns of this scale have foreshadowed a global recession,’ the report said. If its forecast for 1.7 per cent global growth proves accurate, it would be the third- weakest year in three decades, outmatched only by recessions resulting from the 2008 financial crisis or the pandemic.

Mr Malpass said: ‘ Russia’s invasion of Ukraine has added major new costs.

‘The outlook is particularly devastating for many of the poorest economies where poverty reduction is already ground to a halt and access to electricity, fertiliser, food and capital is likely to remain limited for a prolonged period.’ The impact would fall particularly hard on regions such as sub-Saharan Africa, home to 60 per cent of the world’s poor.

The report follows a similarly doom-laden prediction last week from Kristalina Georgieva, managing director of the International Monetary Fund, who said one-third of the world would fall into recession this year.

She added that this was because the world’s three biggest economies – the United States, EU and China – were slowing down simultaneously.