The World Bank (WB) on June 6 released its semi-annual Global Economic Prospects report, in which it assessed that the global economy is in a "precarious" state.
The push is fading.
The global economy will grow 2.1% in 2023 amid continued tightening of monetary policy to curb inflation, the report said, up from the 1.7% forecast by the World Bank in January but down from 3.1% growth in 2022. The bank further cut its 2024 growth forecast from 2.7% to 2.4% due to the lagged effects of central banks’ tightening monetary policy and increased credit conditions, which have weakened investment, according to Reuters.
Containers are loaded onto ships at Ningbo Port, China.
The East Asia and Pacific region is expected to grow 5.5% this year, up from 3.5% last year, as China’s recovery offsets a slowdown in most other economies in the region, the report said. However, excluding China, the region is forecast to grow 4.8% this year, down from 5.8% in 2022, as the post-Covid-19 opening-up momentum begins to fade in economies such as Malaysia, the Philippines and Vietnam. Growth in the region is forecast to pick up to 4.6% in 2024 as the impact of China’s opening-up fades.
Risks to the region's growth outlook include tighter-than-expected global financial conditions, persistently high inflation, a slowdown in China's real estate sector, geopolitical tensions and, in particular, natural disasters in smaller economies, the World Bank said.
Long road ahead
Meanwhile, the Organization for Economic Cooperation and Development (OECD, headquartered in France), a forum whose members are mostly high-income economies, on June 7 released a report on global economic growth prospects in 2023. Accordingly, the organization forecasts that the world economy will grow by 2.7% this year, slightly up from the 2.6% forecast in March. However, this figure is still lower than the growth rate recorded by the OECD in 2022 of 3.3%.
The report cited falling energy prices, easing supply chain bottlenecks and China's earlier-than-expected reopening as contributing factors. However, core inflation remains higher than expected and could force central banks to raise interest rates further. The real estate and financial sectors are said to be starting to feel the growing pressure from higher interest rates.
Economists from the World Bank and the OECD agree that the global economy has a long way to go to achieve strong and sustainable growth. However, World Bank President Ajay Banga noted: "It is important to remember that growth forecasts are not destiny. We have the opportunity to turn things around, but it will require all of us to work together."
China's exports fall sharply
China's General Administration of Customs said yesterday that its exports fell 7.5% in May, the first decline since February and a sharp reversal from an 8.5% increase in April. Rising global inflation, the threat of recession and geopolitical tensions with the United States have weakened purchasing power for Chinese products. Observers say the figures are among a number of signs that China's post-Covid-19 economic recovery is faltering.
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