World Bank: Risk of generalized global recession in 2023 – Small states more vulnerable

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Smaller nations are particularly vulnerable to an economic downturn, the World Bank report warns

The World Bank warns of the risk of a generalized global recession in 2023.

In its six-monthly “World Economic Outlook” report, due on Tuesday, it worries that “further adverse shocks” could push the global economy into recession in 2023, with small states particularly vulnerable.

Even without another crisis, global growth this year “is expected to slow sharply, reflecting the recent tightening of policy aimed at curbing very high inflation, worsening financial conditions and continued turmoil from Russia’s invasion of Ukraine,” it said.

“Urgent global and national efforts” are needed to mitigate the risk of such a recession as well as rising debt in emerging markets and developing economies, where investment growth is expected to remain below the average of the past two decades, according to the bank.
“It is critical that policymakers in emerging and developing markets ensure that any fiscal support is focused on vulnerable groups, that inflation expectations are kept under control and that financial systems remain resilient,” it said.

Similar views have been expressed by central bankers around the world, as they aggressively raise interest rates to reduce price pressures, while governments support businesses and households by curbing energy costs.

It is noted that the head of the International Monetary Fund, Kristalina Georgieva, began 2023 with a warning that the world faces “a tough year, tougher than the year we are leaving behind”. A third of the world economy will be in recession because the US, EU and China are slowing down at the same time, he told US network CBS in an interview on January 1.

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