World Bank Warns Global Recession Due to WorldWide Central Banks’ Rate Hike

According to the latest World Bank report, global economic growth may be gradually edging toward a recession, as central banks raise interest rates simultaneously to combat inflation.

Global policymakers are synchronously raising interest rates and tightening monetary and fiscal policies, according to a report published by the World Bank on September 15th, which may adversely affect the global economy and deteriorate financial conditions more than expected. The current global economy is amid its worst slowdown since 1970, and consumer confidence has fallen lower than the level before several previous global recessions.

Although synchronized global rate hikes and related policies could continue into next year or beyond, inflation is unlikely to return to pre-pandemic levels in the short term, the report said. Global GDP growth is expected to slow down to 0.5% in 2023, with per capita GDP falling by 0.4%. The world might be gradually heading towards a global recession in 2023.

David Malpass, the president of the World Bank Group, expressed concern that a prolonged economic slowdown would have catastrophic consequences for emerging markets and developing economies. Consequently, he suggests policymakers should shift their focus from reducing consumption to increasing production, including expanding investments and improving productivity.