World Bank Predicts India To Grow By 6.9% In 2023, Warns Of Global Recession

World Bank, in its latest Global Economic Prospects report, has forecast India's GDP to grow by 6.9 per cent in FY23, 0.6 per cent lower than its June forecast.

World Bank has predicted the global economy to grow just 1.7 per cent this year, sharply decreasing it from the 3 per cent it forecast in June 2022. The report blames a number of factors, including Russia's invasion of Ukraine, the impact of the Covid pandemic, and effects of higher interest rates as the key challenges. 

The report has also forecast India's GDP to grow by 6.9 per cent in FY23, 0.6 per cent lower than its June forecast. World Bank, in its latest Global Economic Prospects report said, "Growth in India is projected to slow to 6.9 per cent in FY2022/23, a 0.6 percentage point downward revision since June, as the global economy and rising uncertainty will weigh on export and investment growth." 

However, the report added that India was expected to be "the world's fastest-growing major economy". 

The economies of the South Asia region (SAR) continue to be adversely affected by shocks emanating from Russia's invasion of Ukraine, including higher food and energy prices, and by the tightening of global financial conditions as central banks in the region and elsewhere act to fight high inflation, the World Bank said.

It added that several economies maintained resilient growth despite the global economic backdrop. In India, which accounts for three-fourths of the region’s output, growth expanded by 9.7 per cent on an annual basis in the first half of fiscal year 2022/23 (April-March), reflecting strong private consumption and fixed investment growth, the report said. 

“Given fragile economic conditions, any new adverse development—such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic, or escalating geopolitical tensions—could push the global economy into recession,” the World Bank said. 

World Bank said that the global economy is projected to grow by 1.7 per cent in 2023 and 2.7 per cent in 2024. The sharp downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95 per cent of advanced economies and nearly 70 per cent of emerging market and developing economies.

“The crisis facing development is intensifying as the global growth outlook deteriorates,” said World Bank Group President David Malpass.

Growth in the world's richest economies is likely to continue its sharp slowdown from 5.3 per cent in post-pandemic 2021 to 2.5 per cent in 2022 and just 0.5 per cent this year.

"Over the past two decades, slowdowns of this scale have foreshadowed a global recession," the bank warned. 

Over the next two years, per-capita income growth in emerging market and developing economies is projected to average 2.8 per cent, a full percentage point lower than the 2010-2019 average. In Sub-Saharan Africa which accounts for about 60 per cent of the world’s extreme poor growth in per capita income over 2023-24 is expected to average just 1.2 per cent. 

In China, growth is projected at 4.3 per cent in 2023, 0.9 percentage point below previous forecasts.

Excluding China, growth in developing economies is expected to decelerate from 3.8 per cent in 2022 to 2.7 per cent in 2023, reflecting significantly weaker external demand compounded by high inflation, currency depreciation, tighter financing conditions, and other domestic headwinds.