Amidst the context of rising inflation, restrictive monetary policies and higher credit conditions, the World Bank, in its latest World Economic Outlook, pointed to a potential slowdown in global growth and highlighted the risk of developing economies suffering from financial tensions.
According to World Bank data, the global slowdown is expected from 3.1% in 2022 to 2.1% in 2023. In emerging and developing economies, excluding China, the slowdown is expected from 4.1% recorded in 2022 to 2.9% for this year .
“The best way to reduce poverty and extend prosperity is through employment. However, slowing growth makes job creation more difficult,” said Ajay Banga, President of the World Bank Group.
In the same vein, the World Bank noted that although banking tensions in advanced economies had only moderate negative effects, it is difficult for emerging and developing economies to access credit in international markets.
The entity indicated that one in four emerging economies or developing economies has lost access to international bond markets.
“In 2023, the trade growth rate will drop to less than a third of the rate recorded in the years prior to the pandemic,” he noted.
In emerging markets and developing economies, debt pressure is increasing due to higher interest rates, said Indermit Gill, Chief Economist and Senior Vice President of the World Bank Group.
As shown in the World Bank’s Global Economic Prospects report, growth in advanced economies will slow to 0.7% compared to 2022, set at 2.6%, and is expected to remain weak in 2024.
According to the aforementioned report, the US economy will move from growing by 1.1% in 2023 to slowing down by 0.8% by 2024. This is due to the impact of the increase in interest rates recorded over the past year and a half.
Meanwhile in the eurozone, growth will slow from 3.5% in 2022 to 0.4% in 2023.
“This slowdown is a long-term consequence of tightening monetary policy and higher energy prices,” the forecast report says.
Latin America and the Caribbean
In the case of Latin America and the Caribbean, the report points to a slowdown due to lower external demand and monetary policy constraints.
According to forecasts, growth in the region will slow further in 2023 to 1.5%.
The report notes that “the low growth in advanced economies is expected to affect the demand for exports, and it is likely that the continuation of restrictive monetary policies in these economies and high domestic inflation will prevent any improvement in financial conditions in the short term.”
Growth is expected to register a slight increase from 1.2% in 2023 to 1.4% in 2024. In the same vein, Mexico’s behavior is expected to be 2.5% in 2023 and to grow by 1.9%.
Also according to World Bank forecasts, Argentina’s production will decline in 2023 to -2% and in 2024 it will grow by 2.3% as the economy recovers from the drought that affected its agricultural production this year.
Guatemala and Central America
According to World Bank data, Guatemala’s economic growth is expected to reflect a slight increase from 2023 of 3.2% to 2024 of 3.5%. In the rest of Central America, a slowdown of 3.6% is expected in 2023 and a slight increase in 2024 of 3.8%. According to the World Bank, remittances and tourism are expected to support activity in the region.