The global Gross Domestic Product (GDP) will suffer an abrupt slowdown with the weakening of advanced economies, which will exacerbate the headwinds for emerging economies and developing countries, including those in Latin America, warned the World Bank, estimating that World GDP growth will be 1.7 percent in 2023, the slowest in almost three decades.
“Global growth is expected to slow sharply to 1.7 percent in 2023, the third weakest growth rate in nearly three decades, eclipsed only by the global recessions triggered by the pandemic and the financial crisis,” it warned in its Global Economic Outlook.
After an estimated growth in 2022 of 2.9 percent, the global GDP growth forecast of 1.7 percent for this year is 1.3 percentage points below the June forecast, reflecting the tightening of policies aimed at containing the very high levels inflation, worsening financial conditions, and continued disruptions from Russia’s invasion of Ukraine.
“The United States, the euro area, and China are going through a period of pronounced weakness, and the resulting spillover effects have exacerbated other headwinds facing emerging markets and developing economies (EMDEs),” he said, warning of the combination of slow growth, tightening financial conditions, and likely heavy debt undermine investment and trigger corporate defaults.
In the United States, the expectation is that after growth of 1.9 percent in 2022, it will slow down to 0.5 percent in 2023, the weakest performance outside of official recessions since 1970. In the Eurozone, a slowdown is estimated to 0.0 percent from an estimated 3.3 percent in 2022, with activity contracting in the first half of the year before leveling off, and for Japan, projections call for a GDP expansion of one percent this year.
For China, a recovery of 4.3 percent is estimated; however, the outlook for emerging and developing economies has deteriorated markedly due to tightening financial conditions and weakening external demand.
In Latin America, the two largest economies, Brazil and Mexico, will not even reach 1.0 percent growth, and even in countries like Chile, it is estimated that their activity will fall.
The World Bank estimates that the Mexican economy will barely grow 0.9 percent in 2023, after having expanded 2.6 percent during 2022, to resume the average growth of recent years of 2 percent; for 2024 forecasts point to an increase of 2.3 percent.
“Mexico’s economy will expand 0.9 percent this year, according to projections, as tight monetary conditions, persistently high inflation, and declining exports will reduce activity,” it said in its report.
This is the second cut to the expectation of economic growth that the agency has made for Mexico, after last October, it was estimated that Mexico would grow 1.5 percent by 2023; while a few months ago, in June, the estimate was 1.9 percent.
The weakening of the Mexican economy is in line with the outlook for Brazil with an estimated 0.8 percent growth in 2023 and 1.3 percent in the case of Colombia. While, for Chile, a contraction of 0.9 percent is anticipated for the year.
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