WB Raises Global Growth Forecast to 2.1% This Year: "Emerging and Developing Countries Vulnerable"

The World Bank (WB) on the 6th (local time) projected the global economic growth rate for this year at 2.1%. This is a 0.4 percentage point upward revision from the 1.7% forecast released in January, but still 1 percentage point lower than last year. It expects emerging and developing countries to face particular difficulties due to high inflation and interest rate hikes.

In the World Economic Outlook report released on the same day, WB forecasted the global economic growth rate for this year at 2.1%, which is a decline from last year's growth rate of 3.1%. Due to continued monetary tightening to curb high inflation, a moderate growth of 2.4% is predicted for next year.

WB stated, "Global growth is sharply slowing, and as interest rates rise, the risk of fiscal stress in emerging and developing countries is intensifying," adding, "The growth rate of emerging and developing countries excluding China is expected to slow from 4.1% last year to 2.9% this year."

It continued, "Most emerging and developing countries have so far experienced limited damage from recent pressures in the banking sector of advanced economies, but they are now navigating dangerous waters," and expressed concern that "As global credit conditions become increasingly constrained, one in four of these countries has effectively lost access to the global bond market."

For emerging developing countries with low credit ratings, it is expected to be difficult to raise funds through sovereign bond issuance. The average debt-to-GDP ratio of 28 poorest countries, with an annual per capita income below $1,085, has risen from 36% in 2011 to 67%. These countries allocate only 3% of their revenues to support the poor.

The economic growth rate of advanced economies is projected to slow from 2.6% last year to 0.7% this year. WB expects these countries to remain weak in 2024 as well.

The United States is expected to grow by 1.1% this year and then slow to 0.8% in 2024. WB analyzed this as a consequence of rapid interest rate hikes over the past year and a half. However, WB raised its forecast for U.S. growth this year from 0.5% to 1.1%, easing earlier projections at the beginning of the year that the U.S. would enter a recession this year.

The Eurozone is also expected to see its economic growth rate slow from 3.5% last year to 0.4% this year due to monetary tightening. Rising energy prices were also analyzed as a contributing factor.

WB pointed out, "The global economy remains in a precarious state," noting that "The shocks are being compounded by the COVID-19 pandemic, Russia's invasion of Ukraine, and rapid monetary policy tightening."