The global economy could face a recession and one of the weakest paces of growth on record in 2023, according to annual projections released Tuesday by the World Bank Group, following a year of accelerated inflation, worsening financial conditions and Russia’s invasion of Ukraine.
Key Facts
The World Bank, a U.S.-based organization that provides loans and grants to various countries pursuing capital projects, warned the global economy is “perilously close to falling into recession” in its annual Global Economic Prospects report Tuesday.
Forecasts for global growth in 2023 were cut nearly in half, dropping from 3% to 1.7%—the third-weakest pace of growth ever projected by the organization, behind paces recorded during the 2009 and 2020 recessions.
The U.S. is projected to experience 0.5% growth in real GDP in 2023, compared to no growth for the European Union and 2.7% for emerging markets and developing economies (EMDEs)—which includes countries like India (6.6%) and Russia (-3.3%)— excluding China (4.3%).
The organizations said growth projections were cut because inflation rates have “triggered unexpectedly rapid” policies, resulting in worsening financial conditions, while economic “shockwaves” and an energy crisis continue because of Russia’s unprovoked invasion of Ukraine, the organization said.
World Bank President David Malpass suggested investing in creating new jobs, improved cross-border trade and increased energy access could alleviate the issues facing the global economy, adding “there are significant reforms that could be undertaken now” to curve away from a recession.
Big Number
$1 trillion. That’s how much Europe spent on rising energy costs in 2022 because of Russia’s invasion of Ukraine, according to Bloomberg.
Surprising Fact
Despite the World Bank’s projections, Goldman Sachs, noting “inflation has moved past the peak,” projected a growth of 0.6% for the EU in a release Tuesday, though it maintained its projection of a “pronounced” recession in the United Kingdom.
Key Background
Accelerated inflation rates in 2022 required banks around the world to reverse pandemic-era policy measures, resulting in an “incomplete recovery” by global economies, the World Bank said. The organization’s report is a full percentage point lower than projections released in October by the International Monetary Fund, which continued to downgrade its forecast for the global economy in the organization’s biannual report because of worsening inflation and disruptions spurred by the war in Ukraine. “The crisis facing development is intensifying,” Malpass said of the projections, adding “though the world is now in a very tight spot, there should be no room for defeatism.” Federal Reserve Chair Jerome Powell and other reserve officials have noted the U.S. labor market, which posted stronger-than-expected numbers last month, is evidence the U.S. economy can continue to withstand additional rate hikes. Despite this, however, layoffs continue at several large U.S. companies, after nearly 125,000 were laid off in 2020.
OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.
The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.
Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.
Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.
Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.
In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.
This report by The Canadian Press was first published Nov. 5, 2024.
