Global growth is projected to decelerate sharply this year, to its third weakest pace in nearly three decades, overshadowed only by the 2009 and 2020 global recessions, says a flagship report released by the World Bank (WB) this month. This reportedly reflects synchronous policy tightening aimed at containing very high inflation, worsening financial conditions, and continued disruptions from the Russian Federation’s invasion of Ukraine. Investment growth in emerging market and developing economies (EMDEs) is expected to remain below its average rate of the past two decades. Further adverse shocks could push the global economy into yet another recession. Small states are especially vulnerable to such shocks because of their reliance on external trade and financing, limited economic diversification, elevated debt, and susceptibility to natural disasters.
Global Economic Prospects, in particular, notes that global growth is expected to decelerate sharply to 1.7 percent in 2023—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. This is 1.3 percentage points below previous forecasts, reflecting synchronous policy tightening aimed at containing very high inflation, worsening financial conditions, and continued disruptions from Russia’s invasion of Ukraine.
As far as growth in Europe and Central Asia (ECA) region is concerned, the report says it is estimated to have sharply decelerated in 2022, to 0.2 percent, and is projected to remain essentially unchanged at 0.1 percent in 2023. This weakness largely reflects contraction in the Russian Federation in both years and a deep recession in Ukraine in 2022. Excluding these two economies, output in ECA is forecast to grow by a modest 2.1 percent in 2023.
The near-term economic outlook reportedly remains especially uncertain, with risks to the baseline forecast tilted to the downside. These risks include an additional tightening of global financial conditions, financial turmoil, and worsening energy shortage.
The report notes that as a result of the Russian Federation’s invasion of Ukraine, growth in the ECA region is estimated to have slowed sharply in 2022, to 0.2 percent. This reflects contraction in Russia and a deep recession in Ukraine. Excluding these two countries, growth in ECA nearly halved in 2022, to an estimated 4.2 percent, with broad-based deceleration across the region.
Output in ECA is reportedly projected to remain virtually flat in 2023, with growth of only 0.1 percent—a downward revision of 1.4 percentage points since June 2022. Although much of the projected weakness in regional growth this year emanates from a further output decline in Russia, forecasts for 2023 growth have been downgraded for over 80 percent of ECA’s economies.
Growth in Central Asia is projected to remain flat at 3.9 percent in 2023, with activity held back by weak external demand, especially from Russia and China. Although growth in both the Kyrgyz Republic and Tajikistan is expected to exceed previous projections, renewed border tensions between the two countries pose headwinds to the outlook, according to the report.
