Economic Progress

World Bank warns global economy could tip into recession in 2023 - and other economy stories you need to read this week

Top stories: World Bank warns global economy could tip into recession; China’s economic growth set to rebound in 2023, and more.

Top stories: World Bank warns global economy could tip into recession; China’s economic growth set to rebound in 2023, and more. Image: PEXELS/John Guccione

Stephen Hall
Writer, Forum Agenda
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Economic Progress

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  • This weekly round-up brings you the key economic stories from the past seven days.
  • Top stories: World Bank warns global economy could tip into recession; China’s economic growth set to rebound in 2023, poll finds; Wage growth across the eurozone expected to be "very strong", ECB says.

1. World Bank warns global economy could tip into recession in 2023

The World Bank slashed its 2023 growth forecasts on 10 January to levels teetering on the brink of recession for many countries as the impact of central bank rate hikes intensifies, Russia's war in Ukraine continues, and the world's major economic engines sputter.

The bank said it expected global GDP growth of 1.7% in 2023, the slowest pace outside the 2009 and 2020 recessions since 1993. In its previous Global Economic Prospects report, in June 2022, it had forecast 2023 global growth at 3.0%.

It forecast global growth in 2024 to pick up to 2.7% – below the 2.9% estimate for 2022 – and said average growth for the 2020-2024 period would be under 2%, the slowest five-year pace since 1960.

The bank said major slowdowns in advanced economies, including sharp cuts to its forecast to 0.5% for the United States and flat GDP for the eurozone, could foreshadow a new global recession less than three years after the last one.

"Given fragile economic conditions, any new adverse development – such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions – could push the global economy into recession," the bank said in a statement accompanying the report.

The bleak outlook will be especially hard on emerging and developing economies, the World Bank said, as they struggle with heavy debt burdens, weak currencies and income growth, and slowing business investment that is now forecast at a 3.5% annual growth rate over the next two years – less than half the pace of the past two decades.

The global economy is undergoing a prolonged period of low growth.
The global economy is undergoing a prolonged period of low growth. Image: World Bank

2. China’s economic growth set to rebound in 2023, poll finds

China's economic growth is likely to rebound to 4.9% in 2023, before steadying in 2024, a Reuters poll showed, as policymakers pledge to step up support for the COVID-ravaged economy.

Gross domestic product likely grew just 2.8% in 2022 as lockdowns weighed on activity and confidence, according to the median forecasts of 49 economists polled by Reuters. This was slower than a 3.2% rise seen in October's forecast and braking sharply from 8.4% growth in 2021.

Chinese leaders have pledged to spur the world's second-largest economy this year while addressing some key drags on growth – the "zero-COVID" policy and a severe property sector downturn.

Strict COVID-19 curbs were abruptly lifted in December, but surging infections are causing some near-term pains.

"We expect economic activities and consumption to rebound strongly from March-April onwards, helped by post-COVID re-opening and release of excess savings," Tao Wang, chief China economist at UBS, said in a research note.

"The lack of large-scale income- and consumption-stimulus will likely limit the rebound."

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Wage growth across the eurozone is expected to be "very strong" over the next few quarters but real wages are still likely to decline given rapid inflation, a European Central Bank Economic Bulletin article said.

Inflation in Germany has likely peaked as global energy prices have fallen, government economic adviser Monika Schnitzer said, adding that she expects natural gas prices to continue to fall this year. "If nothing unforeseen happens, then we should actually have passed the peak," Schnitzer told Reuters in an interview.

Greece’s economic growth is likely to slow to just 1.1% this year from 5.1% in 2022 as soaring energy costs and continued uncertainty about the war in Ukraine hurt spending and investment, the OECD said.

Core consumer prices in Tokyo, a leading indicator of nationwide trends, rose a faster-than-expected 4.0% in December from a year earlier, exceeding the central bank's 2% target for a seventh straight month, in a sign of broadening inflationary pressure.

Australian inflation re-accelerated in November as strong demand drove holiday costs higher and flooding pushed up vegetable prices, a sign inflationary pressures had yet to peak.

Retail sales volumes in Brazil posted the biggest drop in five months, government statistics agency IBGE said, affected by higher fuel prices and a weak Black Friday performance last year.

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