Global Growth Will Continue to Slow in 2023 Says World Bank

The headwind isn’t expected to soften for the world economy in 2023. For a second year in a row, global economic activity will ease, predicts the World Bank. There’s also a bit of good news, relatively speaking, in the lender’s update of its widely read semiannual Global Economic Prospects report in the form of a slightly higher estimate for growth this year vs. the bank’s January outlook.

Real GDP for the world is expected to rise 2.1% in real (inflation-adjusted) terms, the World Bank advises. That’s up from a 1.7% outlook in the January report.

Despite the modest improvement for the 2023 estimate, the 2.1% forecast for this year’s growth still marks a second year of softer output for the global economy. But growth appears on track to pick up next year and in 2025, albeit with no help in the near term from the US, which the World Bank expects will post weaker economic activity in 2023 in 2024 before rebounding in 2025.

Real GDP Annual Changes

The bank advises,

“Global growth has slowed sharply, and the risk of financial stress in emerging market and developing economies is intensifying amid elevated global interest rates,” 

“The world economy is in a precarious position,” warns Indermit Gill, the World Bank Group’s Chief Economist. “Outside of East and South Asia, it is a long way from the dynamism needed to eliminate poverty, counter climate change, and replenish human capital. In 2023, trade will grow at less than a third of its pace in the years before the pandemic. In emerging markets and developing economies, debt pressures are growing due to higher interest rates.”

For the US, the near-term outlook calls for weak economic activity on a calendar-year basis. GDP growth is projected to decelerate to a sluggish 1.1% gain in 2023, dipping further in 2024 to 0.8%. A recovery, the World Bank forecasts, will come in 2025 when US output is forecast to rebound to a 2.3% gain.

By contrast, moderate US growth is expected to persist in the near term, based on estimates for the second quarter from a range of other sources. As reported yesterday, the median Q2 nowcast for US GDP is 2.0% (real seasonally adjusted annual rate), which is fractionally higher vs. Q1’s gain.