Jan. 10 (UPI) — Only the Great Recession in the mid-2000s and the COVID-19-triggered contraction in 2020 will rival the economic downturn expected this year, the World Bank said Tuesday.
The World Bank joined the chorus of voices fretting over the potential for a global recession in 2023. Kristalina Georgieva, head of the International Monetary Fund, started the new year by suggesting one-third of the world’s economies will enter into recession this year, with the European economies suffering the worst.
A technical recession is characterized by two consecutive quarters of negative GDP and widespread job losses. So far, the U.S. economy, the world’s largest, has boasted a resilient labor market, though recent layoffs from the likes of Amazon and Salesforce could be a troubling sign.
The same can’t be said, however, for the economies of Europe, which continue to grapple with double-digit inflation. The world’s central banks, meanwhile, are losing money and fast because they have to cover some of the losses from recent investments.
“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 World Bank stated. “This would mark the first time in more than 80 years that two global recessions have occurred within the same decade.”
The World Bank expects the global economy to expand only by 1.7% this year, a downward revision from the 3% growth forecast from just six months ago.
U.S. economic growth will be sluggish, at only 0.5% this year. That’s 1.9% below the previous forecast and the worst since 1970.
China, the world’s second-largest economy, is moving in fits and starts as the government adjusts restrictions meant to control the spread of the novel coronavirus that causes COVID-19. China is expected to do better than the United States this year, but the forecast for 4.3% growth in 2023 is nearly 1% below the World Bank’s previous estimate.
In the European Union, where collective activity accounts for one-sixth of total global economic activity, no growth at all is expected this year, a 2.9% revision lower from previous estimates.
World Bank President David Malpass was anything but upbeat, saying the global contraction would be long-lasting and painful, particularly for the world’s poorest populations.
“The deterioration is broad-based,” he said. “In virtually all regions of the world, per-capita income growth will be slower than it was during the decade before COVID-19.”
The market reaction Tuesday was nevertheless muted. Both the Dow and Germany’s DAX were down, just barely, by 0.2% as of 10:45 a.m. EST. The price for Brent crude oil, the global benchmark, 0.7% to trade at $79 per barrel.
