The World Bank has revised its 2023 global growth forecast slightly upwards to 2% from a January forecast of 1.7% on the improved outlook for China’s economy as it winds down pandemic-related restrictions.
China, the world’s second-largest economy, is projected to grow 5.1% this year compared with 4.3% in the bank’s January Global Economic Prospects report, World Bank Group president David Malpass told a media briefing on Monday.
Advanced economies, including the US, are also doing a bit better than the Washington-based lender anticipated in January, he said.
However, the slowdown from stronger growth last year will increase debt distress for developing countries, Mr Malpass said.
Turmoil in the banking sector following the collapse of Silicon Valley Bank and Signature Bank in the US and the takeover of Switzerland’s Credit Suisse by UBS, as well as higher oil prices, could put downwards pressure on growth prospects later this year, he added.
The IMF’s managing director Kristalina Georgieva on Monday said global growth this year would be below its previous 3% forecast and would remain around 3% for the next five years.
“Despite the remarkable resilience of consumer spending in the United States and in Europe, despite the uplift from China’s reopening, global growth would remain below 3% as projected earlier this year, and what is more concerning, it would remain around 3% for the next five years,” she said.
“That does not give us high hopes for meeting the aspirations of people, especially poor people around the world and most importantly, poor people in poor countries.”
In its January World Economic Outlook, the IMF raised its global economic growth estimate for this year by 0.2 percentage points to 2.9% from its October forecast, a slowdown from 3.4% last year.
It warned at the time that the financial environment remains “fragile” as the fight against inflation is not over and will continue to weigh on the global economy, along with Russia’s war in Ukraine.
The fund expects the global economy to rebound to 3.1% next year, below the historical average of 3.8% over the 2000-2019 period.
Last week, the IMF also said about 90% of advanced economies are projected to see a decline in their growth rate this year amid higher interest rates.
“There are emerging markets that are doing better. But for frontier markets, for the poor countries, the future is not so bright and in terms of income per capita growth, poor countries would remain below income per capita growth in middle income countries,” Ms Georgieva said.
She also said central banks have to continue to keep interest rates high to combat inflation and “that is on the way of restoring the prospects for robust growth”.
“We have seen that this rapid transition from low interest rates, abundant liquidity to higher interest rates and much less available liquidity has exposed vulnerabilities in the financial sector, that made the task of policymakers even harder,” she said.
Central banks globally have been raising interest rates to fight inflation. The US Federal Reserve as well as the European Central Bank have hiked interest rates recently as inflation continued to remain high as a result of the pandemic and the Ukraine conflict.
Ms Georgieva said the IMF has been providing financial support to countries since the outbreak of the pandemic three years ago.
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