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World Bank cuts 2023 growth forecast to 1.3%

The World Bank has slashed its global growth forecasts from projections it made in mid-2022 on the back of what it sees as broadly worsening economic conditions.

The international development institution downgraded almost all of its forecasts for advanced economies in the world, cutting its growth outlook for the global economy to 1.7% for 2023, in its latest report, Global Economic Prospects.

The organization earlier projected the world economy to expand by 3% in 2023.

The adjustment was led by a significant downgrade to its prospects for the U.S. economy as it now forecasts 0.5% growth from an earlier projection of 2.4%.

The World Bank cut its growth outlook for China for 2023 from 5.2% to 4.3%, Japan from 1.3% to 1%, and Europe and Central Asia from 1.5% to 0.1%.

“Global growth has slowed to the extent that the global economy is perilously close to falling into recession,” the World Bank said, attributing an “unexpectedly rapid and synchronous” global monetary policy tightening behind the sluggish growth.

The global financial organization also adjusted its 2024 forecasts lower as well, to 2.7% from an earlier prediction of 3% growth.

World Bank President David Malpass said on CNBC’s “Closing Bell” on Tuesday that “China is a key variable and there may be an upside for China if they push through Covid as quickly as they seem to be doing.”

Malpass added “China’s big enough by itself to really lift global demand and supply”.

The World Bank said in its report that a faster-than-expected China reopening poses great uncertainty for its economic recovery.

“The economic recovery [in China] may be delayed if reopening results in major outbreaks that overburden the health sector and sap confidence”.

The report added “There is significant uncertainty about the trajectory of the pandemic and how households, businesses, and policy makers in China will respond.”

Writing by Tersoo Nicholas