“The global economic slowdown and increasing uncertainty will weigh on export and investment growth. Governments increased infrastructure spending and various business facilitation measures, but will boost private investment and support the expansion of manufacturing capacity.”
according to the World Bank in its latest Global Economic Prospects Report.
According to the multilateral lender, the global economy is projected to grow by 1.7% in 2023 and 2.7% in 2024.
“India is expected to be the fastest growing economy of the seven largest EMDEs,” it said, adding that monetary and fiscal tightening over the forecast horizon is expected to be less pronounced than in much of the rest of the region (South Asia). as adequate policy buffers have provided breathing room to support the ongoing recovery and boost public investment.
The bank said extreme weather can also complicate the implementation of macroeconomic policies in many countries. “In India, for example, more erratic monsoon rains have led to more volatile food prices, destabilized household inflation expectations and undermined inflation forecasting ability. and mess up the formulation of monetary policy,” she noted.Global Downturn
The bank said the “sharp slowdown” in global growth is expected to be widespread, with 2023 forecasts being revised downwards for 95% of advanced economies and nearly 70% of emerging and developing economies, and that global growth is expected to stabilize by 2023 could sharply slow its third weakest pace in almost three decades and warns the global economy is “dangerously close” to slipping into recession.
“Further negative shocks – such as higher inflation, even tighter monetary policy, financial stress, deeper weakness in major economies or increasing geopolitical tensions – could push the global economy into recession. This would be the first time in more than 80 years that two global recessions have occurred within the same decade,” the bank warned.
Over the next two years, growth in per capita income in emerging and developing countries is projected to average 2.8%, a full percentage point below the 2010-2019 average.
Growth in advanced economies is forecast to slow to 0.5% in 2023 from 2.5% in 2022. Recessions since 1970, while eurozone growth is expected at zero percent – a downward revision of 1.9 percentage points. In China, growth is forecast at 4.3% in 2023 – 0.9 percentage points below previous forecasts.
Excluding China, the bank said growth in EMDEs is expected to slow to 2.7% in 2023, from 3.8% in 2022, on the back of significantly weaker external demand, which is being fueled by high inflation, currency depreciation, tighter financing conditions and other domestic headwinds is amplified.
“By the end of 2024, GDP levels in emerging and developing countries will be around 6% below the expected pre-pandemic levels. Although global inflation is expected to moderate, it will remain above pre-pandemic levels,” the World Bank said.
In India, which accounts for three-quarters of the region’s output, growth in the first half of FY23 surged 9.7% YoY, reflecting strong private consumption and fixed investment growth.
South Asia growth is expected to slow to 5.5% in 2023 as external demand slows and financing conditions tighten before picking up slightly to 5.8% in 2024, but this pace reflects still “robust growth in India, the Maldives and Nepal reflecting the impact of the floods in Pakistan and the economic and political crises in Afghanistan and Sri Lanka”. However, the deteriorating global environment will weigh on investment in the region, the bank warned.
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