According to the World Bank’s Global Economic Prospects report, global growth is projected to slow from 3.1% in 2022 to 2.1% in 2023, with emerging market and developing economies (EMDEs) facing financial risks due to elevated global interest rates.
The report indicates that one out of every four EMDEs has effectively lost access to international bond markets, and growth projections for these economies for 2023 are less than half those from a year ago, making them highly vulnerable to additional shocks. The report also notes that low-income countries will see per capita incomes in 2024 still below 2019 levels.
- Global growth is projected to slow to 2.1% in 2023, with most EMDEs set to see limited harm from recent banking stress in advanced economies but now sailing in dangerous waters.
- The overlapping shocks of the pandemic, the Russian invasion of Ukraine, and the sharp slowdown amid tight global financial conditions have dealt an enduring setback to development in EMDEs, making them highly vulnerable to additional shocks.
- Rising interest rates have compounded the deterioration in fiscal positions of low-income economies over the past decade, with public debt now averaging about 70% of GDP and 14 low-income countries already in, or at high risk of, debt distress.
Growth in the East Asia and Pacific (EAP) area is rebounding after a significant dip in 2022, aided by robust activity in China following the reopening of its economy and a quick drop in COVID-19 infections. Early in 2023, China’s economy had a robust recovery, supported by the release of stalled demand that increased consumption.
Global growth to slow to 2.1% in 2023, with prospects clouded by financial risks
The EAP region’s GDP is predicted to accelerate to 5.5% in 2023, with a comeback in China balancing sluggish growth in a number of other economies. Growth in the EAP is predicted to drop to 4.6% and 4.5% in 2024 and 2025, respectively, as China’s economy slows and the rest of the region experiences largely stable growth.
“Many developing economies are struggling to cope with weak growth, persistently high inflation, and record debt levels. Yet new hazards—such as the possibility of more widespread spillovers from renewed financial stress in advanced economies—could make matters even worse for them,”Ayhan Kose, Deputy Chief Economist of the World Bank Group
Growth in EAP is anticipated to be 1.2 percentage points higher in 2023 and 0.3 percentage points lower in 2024 when compared to January’s predictions.
The early reopening of China is the main factor that has caused growth there to be revised up by 1.3 percentage points in 2023 but down by 0.4 percentage points in 2024.