World Bank economists warn of recession risks in 2023
The most recent report, prepared by World Bank economists, warns that the global economy could be approaching a recession, in part, due to the monetary policies implemented by some central banks to combat inflation. Latin America, due to its characteristic of being an economy focused mainly on the export of raw materials, could be affected by the situation.
The document, in which the World Bank states that “the findings, interpretations and conclusions expressed are the sole responsibility of the authors”, supports the statement that the three main economies for the organization – the United States, China and the Eurozone – have drastically slowed down in recent months.
“The world could be inching towards a global recession in 2023 and a series of financial crises in emerging markets and developing economies,” reads the statement issued by the body.
Days ago, Christine Lagarde, president of the European Central Bank, warned of a slowdown in the Eurozone, but without implying negative growth for next year. However, in a more complex scenario, it is likely to happen.
“In the benchmark, we do not forecast negative growth in 2023. In the downside scenario, we do. That downside scenario differs from the current situation which includes, notably, the complete shutdown of all gas supply. Russian,” Lagarde said.
Why is a possible global recession looming?
According to World Bank experts, the probability of a recession grows due to various factors, but it is partly associated with increases in the interest rate applied by some central banks to respond to inflation.
“When we entered the economic crisis due to the pandemic, the central banks applied measures to stimulate the economy and favor a rapid recovery. After the pandemic, a recovery begins and some inflationary pressures begin to skyrocket. So, to deal with this phenomenon, the opposite must be done, which is to withdraw stimuli and raise interest rates, but these measures slow down economic activity and at a certain point this can translate into a recession,” said economist James Salazar in conversation with France 24.
On the other hand, Latin America, whose growth could be around 3% according to the International Monetary Fund (IMF), would be affected by this situation due to the characteristics of its economies, which are related to the main economies of the world.
“All regions will be affected. What needs to be seen is which country could be most affected and analyze the structure of their economies, especially the part of public finances, and see which country is better prepared to face it,” explained Salazar.