World Bank Projects 2.1% Global Economic Expansion In The Face Of Higher Interest Rates

The global economy is likely slowing sharply this year, hobbled by high-interest rates, the impact of Russia's invasion of Ukraine, and the lingering effects of the coronavirus pandemic. As per the latest outlook report from World Bank, a 189-country anti-poverty agency.

In its latest Global Economic Prospects report issued on Tuesday, the World Bank has given an estimate that the international economy will expand by just 2.1% in 2023 after growing 3.1% in 2022. It's still, is an upgrade from the previous January forecast of worldwide growth of just 1.7% this year.

To combat a resurgence of inflation, the Federal Reserve and other major central banks across the globe have been aggressively raising interest rates. It was set off by a stronger-than-expected rebound from the pandemic recession, persistent supply shortages, and energy and food price shocks caused by the Ukraine war, as per the PTI news report.

But the global economy has proved to be surprisingly resilient in the face of higher borrowing costs, and the World Bank predicts that growth will accelerate to 2.4% in 2024.

In its report, the World Bank upgraded its forecast for the United States' economic growth this year to 1.1%. Although weak, it is more than double the growth which was envisioned in January.

The US has continued to generate unexpectedly robust job gains - employers added 3,39,000 workers in May. This was far more than what the economists had projected - even though the Fed has raised its benchmark rate 10 times in the past 15 months.

The eurozone, which represents the 20 countries that share the euro currency, is expected to post collective growth of 0.4% this year. It too, is a slight upgrade from January's forecast, the World Bank had expected no growth at all for the eurozone this year.

Europe has been struggling with higher energy prices caused by the Ukraine war and enjoyed relief from a surprisingly warm winter, which reduced demand for heat.

The World Bank upgraded its 2023 outlook even for China after Beijing, late last year relaxed its draconian zero-COVID policies, which had restricted travel and hammered its economy.

The world's second-biggest economy is now expected to grow 5.6% in 2023, up from 3% last year. The World Bank envisions Japan's growth decelerating to 0.8% this year from 1% in 2022.

It foresees India's growth slowing to a still-strong 6.3% from 7.2% last year. The bank predicts that global trade will slow markedly this year. It foresees a sharp drop in the price of energy and other commodities this year and next.