The World Bank has slashed the initial 2.8 per cent International Monetary Fund (IMF) projected 2023 global economic growth to 2.1 per cent as a result of uncertainties amid high-interest rates.
The flobal growth has slowed sharply and the risk of financial stress in Emerging Market and Developing Economies (EMDEs) is intensifying according to the World Bank’s latest Global Economic Prospects report released on June 6 2023.
“The Global growth is projected to decelerate from 3.1 per cent in 2022 to 2.1 per cent in 2023” the report read.
Also, in EMDEs other than China, growth is set to slow to 2.9 per cent in 2023 from 4.1 per cent recorded in the preceding year as growth projections for 70 percent of EMDEs and nearly all advanced economies have been downgraded.
“Most EMDEs have seen only limited harm from the recent banking stress in advanced economies, however they are now sailing in dangerous waters.
“With increasingly restrictive global credit conditions, one out of every four EMDEs has effectively lost access to international bond markets.
“The squeeze is especially acute for EMDEs with underlying vulnerabilities such as low creditworthiness. Growth projections for these economies for 2023 are less than half those from a year ago, making them highly vulnerable to additional shocks” the statement noted.
Speaking on the report, the World Bank Group President Ajay Banga revealed that the surest way to curtail poverty is through employment but it will be almost if growth rate is slow.
“The surest way to reduce poverty and spread prosperity is through employment and slower growth makes job creation a lot harder.
“It’s important to keep in mind that growth forecasts are not destiny, we have an opportunity to turn the tide but it will take us all working together” Banga said.
Also commenting the World Bank Group’s Chief Economist and Senior Vice President Indermit Gill said outside of East and South Asia, it is a long way from the dynamism needed to eliminate poverty, counter climate change, and replenish human capital.
He said, “In 2023, trade will grow at less than a third of its pace in the years before the pandemic. In emerging markets and developing economies, debt pressures are growing due to higher interest rates.”
Fiscal weaknesses have already tipped many low-income countries into debt distress. Meanwhile, the financing needs to achieve the sustainable development goals are far greater than even the most optimistic projections of private investment, Gill acknowledged.
He also stressed that the overlapping shocks of the pandemic, the Russian invasion of Ukraine, and the sharp slowdown amid tight global financial conditions have dealt an enduring setback to development.