World Bank Cuts Global Growth Forecast as Developing Countries Struggle with Debt
Ministers, business leaders, economists and development groups convened this week for the annual World Economic Forum in Davos, Switzerland. The pandemic, Ukraine war, food crisis and rising inflation dominated talks at the meetings.
“A positive message from the gathering is that a strong economy is built on addressing poverty and protecting our planet,” said Eric LeCompte, Executive Director of the religious development group Jubilee USA, which monitors the forum. “While the gathering can help build consensus on solutions to global problems, we didn't hear any sense of urgency about the economic crises that most countries face.”
The World Bank cut the 2023 global economic growth forecast, noting that only twice in the last two decades did the economy grow more slowly. Those slowdowns occurred in 2008 – the global financial crisis -- and 2020, the pandemic crisis. One-third of developing countries will not regain their pre-2019 income levels until 2024 or later, the recent Bank report found.
“As major economies raise interest rates to counter inflation, the higher rates increase debts for the poorest countries,” LeCompte stated. "As debt becomes more unsustainable, more countries will default and all countries will struggle with greater economic and supply shocks."
The IMF recently announced it will convene a high-level debt roundtable to resolve outstanding issues with a G20 debt reduction initiative that has been in place for more than 2 years.
Read the World Bank's Global Economic Prospects report here.