Global Growth Likely To Decelerate Sharply To 1.7% In 2023: World Bank

World Bank in its global economic prospects report has said that global growth is expected to decelerate sharply to 1.7 per cent in 2023— the third weakest pace of growth in nearly three decades, overshadowed only by the global recessions amid the pandemic and financial crisis. 

The bank said that this is 1.3 percentage points below previous forecasts, reflecting synchronous policy tightening aimed at containing very high inflation, worsening financial conditions and continued disruptions from Russia's invasion of Ukraine. 

"The United States, the euro area and China are all undergoing a period of pronounced weakness, and the resulting spillovers are exacerbating other headwinds faced by emerging market and developing economies (EMDEs)," it stated.

The combination of slow growth, tightening financial conditions and heavy indebtedness is likely to weaken investment and trigger corporate defaults. 

It further said that higher inflation, tighter policy, financial stress, deeper weakness in major economies, or rising geopolitical tensions could push the global economy into recession.

The international body stated that in the near term, urgent global efforts are needed to mitigate the risks of global recession and debt distress in EMDEs. 

"Given limited policy space, it is critical that national policymakers ensure that any financial support is focused on vulnerable groups, that inflation expectations remain well anchored, and that financial systems continue to be resilient," it added.

Also, policies are also needed to support a major increase in EMDE investment, which can help reverse the slowdown in long-term growth exacerbated by the overlapping shocks of the pandemic, the invasion of Ukraine, and the rapid tightening of global monetary policy.

Meawhile, it stated, "This will require new financing from the international community and from the repurposing of existing spending, such as inefficient agricultural and fuel subsidies."