The World Bank lowered its growth forecast for the global economy this year as inflation persists and raises the risk of a worldwide recession, according to The Wall Street Journal (subscription).
What’s going on: “The bank expects global growth to slow to 1.7% in 2023, down from an estimate of 3% growth in June. That would mark the third-weakest pace of global growth in nearly three decades, overshadowed only by the 2009 and 2020 downturns, according to the World Bank. A separate report showed that global inflation, while starting to cool, remains historically high.”
- While this forecast keeps the world economy out of “recession territory” for now, some experts are predicting that parts of the world may experience a recession for some of 2023.
Signs of cooling: “Figures released by the Organization for Economic Cooperation and Development Tuesday showed consumer prices across the Group of 20 largest economies—which are responsible for four-fifths of global economic output—were 9% higher than a year earlier in November, a slowdown from the 9.5% rate of inflation recorded in October. That was the first drop in the G-20 inflation rate since August 2021.”
Our take: “The global economy continues to weaken, with economic and geopolitical uncertainties taking a toll on activity, including for manufacturers,” said NAM Chief Economist Chad Moutray. “There are notable downside risks in the outlook, with rising interest rates from central banks around the world dampening activity in an attempt to curtail pricing pressures.”
- “For their part, more than 62% of respondents to the latest NAM Manufacturers’ Outlook Survey said that the economy could officially slip into a recession this year if it has not already.”
- “However, the strong labor market and resiliency in spending could provide the ‘soft landing’ in the economy that the Federal Reserve is seeking.”