Global Economy skating on thin ice says World Bank

By Dana Malcolm

Staff Writer

January 11, 2023 – The global economy is now so fragile that the slightest unfavorable development could push it into a recession and developing economies are staring down the barrel of sharp poverty rises and snail’s pace economic growth.  This is the outlook of The World Bank according to a press release on Tuesday.

The bank said any new adverse development—such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions—all of which is happening on a small scale currently—could push the global economy into recession.

This would mark the first time in more than 80 years that two global recessions have occurred within the same decade.

Economic growth is expected to be only 1.7 percent globally the downturn is expected to affect nearly every country across the globe including  95% of advanced economies and nearly 70% of emerging market and developing economies.  For Latin America and the Caribbean the outlook is even worse.  Growth is projected to slow to a low 1.3% in 2023 before recovering to 2.4% in 2024.

David Malpass, World Bank Group President explained what could happen to small developing economies like so many in The Caribbean projecting little investment opportunities and barely any growth that will affect all areas of life.

“Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment as global capital is absorbed by advanced economies faced with extremely high government debt levels and rising interest rates.  Weakness in growth and business investment will compound the already-devastating reversals in education, health, poverty, and infrastructure and the increasing demands from climate change.”

The bank says investment in emerging economies will likely to grow by less than half the rate that prevailed in the previous two decades and even though global inflation is expected to moderate, it will remain above pre-pandemic levels.

With this in mind the report called upon the global community to assist small states by maintaining the flow of official assistance to support climate-change adaptation and help restore debt sustainability.