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Live Trading News > Blog > Politics > America > Biden Leading World to Recession
America

Biden Leading World to Recession

Shayne Heffernan Ph.D.
Last updated: January 14, 2023 9:47 pm
Shayne Heffernan Ph.D.
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Growth of the global economy will reach just 1.7% in 2023, the World Bank has projected, slashing its outlook from last year by nearly half, citing broadly worsening economic conditions.

Global economic growth can be defined as the rate of increase in the total output of goods and services produced by the global economy. It is typically measured as the annual percentage change in Real Gross Domestic Product (GDP). Global economic growth has slowed in recent years due to a variety of factors, including increased trade tensions, a slower pace of expansion in major economies such as the United States and China, and slower growth in emerging markets. Some economists believe that the global economy is at a tipping point and could be headed for a recession in the near future.

The Washington-based institution has cut nearly all of its projections for the most advanced economies. In June, its analysts predicted 3% growth for this year.

The massive downgrade was a result of drastic changes to the World Bank’s expectations for the growth of the US economy. Now, US GDP is projected to increase by 0.5%, down from the earlier forecast of 2.4%.

“The United States, the euro area, and China are all undergoing a period of pronounced weakness, and the resulting spillovers are exacerbating other headwinds faced by emerging market and developing economies,” the World Bank said in its latest report, Global Economic Prospects.

China’s growth outlook was also slashed from 5.2% to 4.3%, while Japan is expected to demonstrate growth of just 1%, versus the previously projected 1.3%. The international development institution also cut its outlook for 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 economists said, attributing the sluggish growth to an “unexpectedly rapid and synchronous” tightening of global monetary policy.

The estimates would signify “the third weakest pace of growth in nearly three decades, overshadowed only by the global recessions caused by the pandemic and the global financial crisis.”

The World Bank analysts stressed that hawkish policies followed by monetary regulators across the world have “contributed to a significant worsening of global financial conditions, which is exerting a substantial drag on activity.” 

This year is expected to be even “tougher” than 2022 as the US, EU and Chinese economies slow down, according to the head of the International Monetary Fund (IMF).

The Ukraine conflict, soaring prices, hiked interest rates and unrelenting Covid in China will continue to exert an impact on the global economy, Kristalina Georgieva told CBS’ Face the Nation program on Sunday.

“We expect one-third of the world economy to be in recession. Even countries that are not in recession, it would feel like recession for hundreds of millions of people,” she said.

In October, the IMF slashed its outlook for global economic growth in 2023 citing the ongoing conflict in Ukraine, along with tougher monetary policies pursued by central banks around the world in an effort to rein in rising prices, including energy costs. Since then, Beijing has abandoned its zero-Covid policies, having begun to reopen the economy despite the rapid spread of coronavirus infections.

According to Georgieva, China will face a difficult start to 2023, as the world’s second-biggest economy is likely to grow at or below global growth for the first time in 40 years.

“For the next couple of months, it would be tough for China, and the impact on Chinese growth would be negative, the impact on the region will be negative, the impact on global growth will be negative,” the IMF chief warned.

When it comes to the US, Georgieva called the nation the “most resilient,” adding that it might avoid recession with the labor market remaining quite strong.

“This is… a mixed blessing because if the labor market is very strong, the Fed [the Federal Reserve] may have to keep interest rates tighter for longer to bring inflation down,” she said.

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By Shayne Heffernan Ph.D.
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Shayne Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 40 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.
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