Global economic growth will come "perilously close" to a recession this year, led by weaker growth in the United States, Europe and China, the World Bank warned on Tuesday. In an annual report, the World Bank, which lends money to poorer countries for development projects, said it had slashed its forecast for global growth this year by nearly half, to just 1.7%, from its previous projection of 3%. Assuming that forecast is accurate, it would be the slowest annual expansion in three decades, behind only the deep recessions caused by the 2008 global financial crisis and the 2020 Coronavirus pandemic.

The United States may not go into recession this year – the World Bank predicts 0.5% growth – but global weakness, combined with higher prices and higher borrowing rates, will likely add another headwind to America's businesses and consumers. The United States also remains vulnerable to further supply chain disruptions if COVID-19 keeps surging or Russia’s war in Ukraine worsens. As a result of a weaker Chinese economy, Europe, long a major exporter of China, is likely to suffer.

According to the World Bank report, rising interest rates in developed economies like the United States and Europe will entice investment capital from poorer countries, thereby limiting their domestic investment. At the same time, the report said, those high interest rates will slow growth in developed countries at a time when Russia’s invasion of Ukraine has kept world food prices high. “Russia’s invasion of Ukraine has added major new costs,” World Bank President David Malpass said on a call with reporters. “The outlook is particularly devastating for many of the poorest economies where poverty reduction is already ground to a halt and access to electricity, fertilizer, food and capital is likely to remain limited for a prolonged period.”

Poorer countries in areas such as Saharan Africa, which is home to 60% of the world's poor, would be particularly hard hit by a global downturn. The World Bank predicts per capita income will grow just 1.2% in 2023 and 2024, which is such a tepid pace that poverty rates could rise. “Weakness in growth and business investment will compound the already devastating reversals in education, health, poverty and infrastructure and the increasing demands of climate change,” Malpass said. It will take significantly more resources for development and global public goods to address the scale of these challenges.