"Stagnation Crisis" World Bank Lowers Global Growth Rate from 3.0% to 1.7% This Year

[Image source=Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The World Bank (WB) has significantly lowered its global economic growth forecast for this year, citing high inflation, interest rate hikes, and Russia's invasion of Ukraine.

On the 10th (local time), WB released its "Global Economic Prospects," revising this year's global economic growth rate down to 1.7%. This is 1.3 percentage points lower than the 3.0% forecasted in the June report last year.

WB stated, "Except for the recessions in 2009 and 2020, this is the lowest growth rate in the past 30 years," adding, "Considering the fragile economic conditions, new adverse factors such as higher-than-expected inflation, rapid interest rate hikes to curb it, the resurgence of COVID-19, and escalating geopolitical tensions could push the global economy into a recession."

By country and region, the economic slowdown outlook for advanced economies was particularly pronounced. Both the United States and the Eurozone saw their growth forecasts sharply lowered to 0.5%. For the U.S., this is 1.9 percentage points lower than the previous forecast. Due to the economic slowdown in major advanced countries, there is a warning that the world could enter a new recession in less than three years. China is expected to recover somewhat economically this year with a 4.3% growth rate compared to the 2% range last year, but this is also 0.9 percentage points lower than the previous forecast.

Additionally, WB warned that emerging markets and developing countries are facing difficulties due to high debt burdens, currency depreciation, and slowing corporate investment, which could further worsen the global economic situation. While some inflationary pressures, including recent energy and commodity prices, have begun to ease, there is concern that core inflation may continue to rise. This could lead central banks worldwide to implement more aggressive tightening than expected, exacerbating the global economic slowdown.