Global Economic Prospects Report

  • 08 Jun 2023

Recently, the World Bank released its Global Economic Prospects report, which provides insights into the state of the global economy.

Key Findings

  • India Remain the Fastest-Growing Economy: India will remain the fastest-growing economy among the largest emerging markets & developing countries (EMDE) although the country’s gross domestic product growth is expected to slow to 6.3 per cent in 2023-24
  • Negative Shocks: The global economy is still dealing with the aftermath of multiple negative shocks. These include the ongoing effects of the pandemic, the Russian Federation's invasion of Ukraine, and the tightening of monetary policy to control high inflation.
  • Projected Slowdown: Global growth is expected to slow significantly in the second half of the current year, with weakness continuing into 2024. Inflation pressures persist, and tight monetary policy is likely to weigh heavily on economic activity.
  • Banking Sector Stress: Recent stress in the banking sectors of advanced economies is expected to dampen activity due to more restrictive credit conditions. Further banking turmoil and tighter monetary policy could result in even weaker global growth.
  • Rising Borrowing Costs: Rising borrowing costs in advanced economies may lead to financial disruptions in more vulnerable EMDEs.
  • Fiscal Challenges: Fiscal positions in low-income countries are becoming increasingly precarious. Comprehensive policy action is needed at both the global and national levels to foster macroeconomic and financial stability.
  • International Cooperation: Continued international cooperation is necessary to address climate change, support crisis-affected populations and combat hunger, and provide debt relief where needed.
  • Long-Term Growth Reforms: Reversing the projected decline in potential growth for EMDEs will require reforms to enhance physical and human capital and labor-supply growth.
  • Regional Prospects: Growth prospects vary across different regions of EMDEs. East Asia and the Pacific (EAP) and Europe and Central Asia (ECA) are expected to experience growth in 2023, while other regions like Latin America and the Caribbean (LAC) and the Middle East and North Africa (MNA) may see a slowdown. Geopolitical tensions, social unrest, and climate change pose additional risks.
  • Financial Spillovers: The rapid rise in U.S. interest rates presents challenges for EMDEs. Adverse financial market effects and a higher risk of financial crises have been observed, particularly in EMDEs with greater economic vulnerabilities.
  • Fiscal Policy Challenges in Low-Income Countries: Low-income countries face limited fiscal maneuverability due to growing debt, persistent revenue weakness, and widening deficits. Generating higher revenues, improving spending efficiency and enhancing debt management practices are necessary.