The World Bank Group president, David Malpass, says global growth is expected to be weak in 2023, slowing to two per cent from 3.1 per cent in 2022.

Mr Malpass said this in his opening address at the Spring Meetings 2023 Media Call.

He said several factors were weighing on the second-half outlook.

“Oil prices have jumped back above $80 dollars per barrel. The recent banking sector stress dampens activities, and inflation pressures persist,” Mr Malpass noted.

Mr Malpass said the U.S. month-over-month core inflation had risen over the last five months, saying there would be new data on Wednesday.

“If we look at developing countries excluding China, we expect a slowdown to about 3.1 per cent in 2023 from 4.1 per cent in 2022. The concern in our recent reports is that slow growth will persist for years for many developing countries, increasing the fiscal stress and debt problems,” the bank president explained. “It is a combination of weak investment, higher interest rates, and relatively weak growth in the advanced economies.”

He said the danger was acute due to inflation, currency depreciation, rising debt service costs, and the collapse of international reserves.

Mr Malpass said the diversion of natural gas to Europe presented grave obstacles to developing country production of electricity, fertiliser, and food.

“These problems are severely constraining future growth and deepening inequality and fragility for developing countries. I travelled to West Africa in March, where we are working to provide support in the face of these problems,” stressed Mr Malpass. “Looking at the big picture, I will mention two problems; first, the normalisation of interest rates after an artificial decade near zero.”

He said this created problems in terms of the duration mismatch seen in the bank failures, liquidity shortages, and how to allocate the losses, adding that the “duration mismatch will take time to digest. With inflation persistent and the dollar weakening, the risk is that the losses will be allocated to those with lower incomes, including through inflation.”

Mr Malpass said the second major problem was that a narrow group of advanced economies absorbed the available global capital with extremely high government debt levels.

“I will call them sinkholes. To make matters worse, their populations are ageing rapidly, and the peace dividend of the 1990s was used up,” he stated.

(NAN)