Global growth slows to 2% in 2023

Global growth is expected to slow down to two per cent in 2023, according to David Malpass, the President of the World Bank Group. He highlighted several factors such as higher oil prices, inflation pressures, and the recent banking sector stress that are dampening economic activity. Malpass said that the recent reports indicate slow growth will persist for years in many developing countries, increasing fiscal stress and debt problems. It is a combination of weak investment, higher interest rates, and relatively weak growth in advanced economies that are leading to this situation.

Malpass emphasised that the normalisation of interest rates after an artificial decade near zero created problems in terms of duration mismatch, liquidity shortages, and bank failures, and how to allocate the losses. He further added that inflation persistence and the weakening dollar increase the risk of allocating the losses to those with lower incomes. Malpass also mentioned that the diversion of natural gas to Europe is severely constraining future growth and deepening inequality and fragility for developing countries. He added that the World Bank is working to provide support to West Africa in the face of these problems.

Malpass said the US month-over-month core inflation had been rising over the last five months, and new data will be available on Wednesday. He added that the concern in recent reports is that slow growth will persist for years for many developing countries, increasing fiscal stress and debt problems. The danger is acute due to inflation, currency depreciation, rising debt service costs, and the collapse of international reserves. Malpass concluded that there is a need to address these challenges by implementing appropriate policies and measures that would promote growth and development, reduce inequality and support poverty reduction.