Global economy at risk of a recession, World Bank warns

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Global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine, according to the World Bank’s latest Global Economic Prospects report.

The report, released Tuesday, by the World Bank stated that given fragile global economic conditions, any new adverse development – such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions – could push the global economy into recession.

While the United States might avoid a recession this year — the World Bank predicts the US economy will eke out growth of only 0.5% and global weakness will likely pose another challenge for America’s businesses and consumers, on top of high prices and more expensive borrowing rates. The United States also remains vulnerable to further supply chain disruptions if COVID keeps surging or the war in Ukraine worsens.

Europe will also likely suffer from a weaker Chinese economy, given that it has for long been a major exporter to China.

The World Bank report also noted that rising interest rates in developed economies like the United States and Europe will attract investment capital from poorer countries, thereby depriving them of crucial domestic investment. At the same time, the report said, those high interest rates will slow growth in developed countries at a time when Russia’s invasion of Ukraine has kept world food prices high.