Global economy may suffer massive recession in 2023, warns World Bank

New Delhi: The world could face a recession next year amid simultaneous monetary policy tightening by central banks around the world to boost production and reduce inflation, the World Bank has said in a report.

The World Bank report said that there are already many signs of a global slowdown. It said that the global economy is now poised for the sharpest recession since the 1970s. The report said that global interest rate hikes by central banks around the world could reach 4%, which is double the figure of 2021.

Central banks from the USA to Europe and India are increasing interest rates in order to control inflation. However, this reduces investment and has a negative impact on the pace of economic growth. It lowers the cost of jobs, and suppresses growth, a trade-off facing most countries, including India, the World Bank report said.

Global growth is slowing rapidly, and is likely to slow further as more countries fall into recession.

“My deep concern is that these trends will continue with long-lasting consequences that are disastrous for people
in emerging markets and developing economies,” World Bank President David Malpass said in a statement after the report was released on Thursday.

The world is facing record inflation due to a number of factors, including the Russia-Ukraine war, which has reduced food supplies, the effects of the pandemic on supply chains, poor demand due to continued Covid-19 lockdowns in China, and extreme weather that raised agricultural forecasts.

The Reserve Bank of India (RBI) in August announced the third repo rate hike to 5.40%. The base score is 50. One basis point is one hundredth of a percentile. RBI retained its inflation forecast for 2022-23 at 6.7%, while forecasting real (inflation-adjusted) GDP growth at 7.2%.

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