The World Bank cut its global growth expectations from mid-2022 to reflect what it sees as broadly deteriorating economic environment.
"Global growth has slowed to the extent that the global economy is perilously close to falling into recession," the World Bank said.
In its newest report, Global Economic Prospects, the international development organization revised almost all of its estimates for advanced economies around the world, lowering its global growth forecast to 1.7% in 2023. The organization had predicted that the global economy will grow by 3% in 2023.
The revision was driven by a major decrease in its outlook for the US economy, which now anticipates 0.5% growth instead of 2.4% previously.
The revised projections would represent "the third weakest pace of growth in nearly three decades, overshadowed only by the global recessions caused by the pandemic and the global financial crisis."
Tighter monetary policies from central banks throughout the world may have been required to manage inflation, but they have "contributed to a significant worsening of global financial conditions, which is exerting a substantial drag on activity," according to the World Bank.
"The United States, the euro area, and China are all undergoing a period of pronounced weakness, and the resulting spillovers are exacerbating other headwinds faced by emerging market and developing economies," it said.
China's growth forecast for 2023 has been reduced from 5.2% to 4.3%, Japan's from 1.3% to 1%, and Europe and Central Asia's from 1.5% to 0.1%, according to the World Bank.
It cut its 2024 growth forecast to 2.7% from 3% previously.
A faster-than-expected reopening in China offers significant uncertainty for the country's economic recovery, according to the World Bank's assessment.
"The economic recovery [in China] may be delayed if reopening results in major outbreaks that overburden the health sector and sap confidence," the report said. "There is significant uncertainty about the trajectory of the pandemic and how households, businesses, and policymakers in China will respond."
The World Bank has downgraded its growth projections for China (2023) from 5.2% to 4.3%, Japan from 1.3% to 1%, and Europe and Central Asia from 1.5% to 0.1%.
The World Bank decreased their growth prediction for 2024 from 3% to 2.7%.
According to the World Bank's assessment, a quicker-than-anticipated reopening in China poses serious uncertainties for the nation's economic recovery.
"One of the questions for the world would be, which does it do most - if it's mostly putting upward pressure on global demand, then that raises commodity prices," he said. "But it also means that the Fed will be hiking for a longer period of time."
