The World Bank Group President, David Malpass, announced on Monday that the bank had revised its 2023 global growth outlook to 2% from the previous forecast of 1.7% in January. The upward revision was due to an improved economic outlook for China as the country’s growth projection was revised upward to 5.1% for this year, up from 4.3% in January. Additionally, advanced economies such as the US and Europe have performed better than expected, according to Malpass.
However, Malpass warned that developing countries will face more debt distress as they try to cope with the slowdown from stronger growth in 2022. He expressed concerns that higher oil prices and banking sector turmoil could put downward pressure on growth prospects in the second half of 2023. Banks are also likely to pull back credit for businesses, which could slow growth.
Debt Relief for Poor Countries
Malpass stated that technical meetings with Chinese officials this week could facilitate potential movement on badly needed debt relief for poor countries. He suggested that China would score some political points at a low cost for its lending institutions. He added that it would be beneficial for China to make this move from both economic and political standpoints.
I was pleased to join the Global Parliamentary Forum, highlighting macro stability, private investment, trade, global public goods, and the WBG evolution.
The @WorldBank Group values its partnership with parliamentarians in tackling global issues. pic.twitter.com/4mQ4juJpso
— David Malpass (@DavidMalpassWBG) April 10, 2023
Slow Medium-Term Outlook for Growth a Problem
Malpass and the International Monetary Fund’s Managing Director, Kristalina Georgieva, acknowledged that the slow medium-term outlook for growth is a problem for developing countries. The IMF estimates that growth will remain below 3% this year and around 3% for the next five years. Malpass emphasized that higher growth was needed to create jobs and slow economic migration from poor countries. He noted that capital was flowing out of developing countries, and reversing these flows would require interest rates normalization.
Conclusion
The World Bank’s upward revision of the global growth forecast for 2023 is welcome news, particularly for China and advanced economies such as the US and Europe. However, the bank’s concern about debt distress for developing countries highlights the need for measures such as debt relief. Additionally, the slow medium-term outlook for growth is a problem that needs to be addressed to create jobs and slow economic migration from poor countries. Technical meetings between the World Bank and Chinese officials could facilitate progress in this area.
