The World Bank has issued a warning that “even a minor setback” might push the world economy into recession in the upcoming year as concerns about a global economic slowdown spread throughout the regions.
The Bank stated that the world economy is experiencing its worst slowdown since 1970 and that “consumer confidence (is) already suffering a far greater loss than during the run-up to past global recessions” in its analysis of 2022.
The report notes that the confluence of problems that characterized the year have nonetheless been impeding global development.
“The world’s three largest economies – the United States, China, and the euro area – have been sharply slowing. Under the circumstances, even a moderate hit to the global economy over the next year could tip it into recession,” it noted.
Investors are preparing for a potential decline in gross domestic product in the upcoming year, making recession fear a dominant economic issue on all markets.
The economy has seen a tight monetary environment this year as central banks around the world have insisted on continuing their efforts to control post-COVID inflation at any costs.
The COVID-19 pandemic “dealt the largest setback to global poverty reduction efforts in decades,” according to the World Bank report, despite the recovery being largely two-track. The report also highlighted the lingering effects of COVID-19 on the survival of people, particularly those in poor countries.
It started: “By the end of 2022, as many as 685 million people could be living in extreme poverty — making 2022 the second-worst year for poverty reduction in the past two decades (after 2020).
“In addition to the lingering effects of the pandemic, rising food and energy prices – fueled by climate shocks and conflicts such as the war in Ukraine – have hindered a swift recovery. It is now projected that seven per cent of the world’s population – roughly 574 million people – will still struggle in extreme poverty in 2030 – far short of the global goal of three per cent in 2030.”
It also named the debt crisis as one of the most crippling problems the world has ever faced. It was highlighted that the debt crisis affecting developing countries had gotten worse over the course of the year, with 60% of the world’s poorest nations experiencing or at risk of experiencing debt distress.
“Overall debt levels have increased for developing countries over the past decade, with some 60 percent of the world’s poorest countries either in debt distress or at risk of it.”
“Over-encumbered with debt, the world’s poorest are not able to make critical investments in economic reform, health, climate action, or education – among other key development priorities. Perhap more significantly, the composition of debt has changed dramatically since 2010, with private creditors playing an increasingly larger role,” it noted.
The report also addresses other pressing challenges that have kept policymakers up at night this year, including hunger, climate change, and the energy crisis.