The Qatar Central Bank confirmed that the World Bank expects the Qatari economy to grow by 3.3 percent in 2023, according to the recently released World Economic Outlook report, at a time when global growth is witnessing a sharp slowdown, with increased risks of financial stress in emerging market and developing economies. amid rising global interest rates
The Global Economic Prospects report revealed that global growth is expected to slow from 3.1% in 2022 to 2.1% in 2023. With regard to emerging market economies and developing economies other than China, the report expected their growth rate to slow to 2.9% this year after That recorded a growth of 4.1% last year. This forecast reflects a broad decline.
The World Bank added that most of the emerging market and developing economies have witnessed only limited damages due to the recent banking pressures in the advanced economies, but the sails of these economies are currently sailing in dangerous waters. One in four emerging market and developing economies has effectively lost access to international bond markets, in light of the increasing tightening of global credit conditions. These pressures are particularly severe for emerging market and developing economies that suffer from underlying vulnerabilities such as low creditworthiness. Growth projections for these economies for 2023 are less than half of what they were a year ago, making them highly vulnerable to additional shocks.
The latest projections indicate that the overlapping shocks of the COVID-19 pandemic, Russia’s invasion of Ukraine, and a sharp slowdown in tightening global financial conditions have led to a prolonged setback to development efforts in emerging market and developing economies, something that may persist for the foreseeable future. Therefore, economic activity in these economies is expected to be less than 5% by the end of 2024, compared to levels expected prior to the outbreak of the pandemic.
In low-income countries – and especially the poorest ones – the damage is stark. In more than a third of these countries, per capita income in 2024 will remain below 2019 levels. This weak pace of income growth also has the potential to widen extreme poverty. in many low-income countries.
As for the advanced economies, the report expected the growth rate to decline from 2.6% in 2022 to 0.7% this year, and to remain weak in 2024. After the US economy grew by 1.1% in 2023, it is expected to slow to 0.8% in 2024. This is primarily due to the continuing impact of the sharp rise in interest rates over the past year and a half. In the Eurozone, growth is expected to slow to 0.4% in 2023 from 3.5% in 2022, due to the delayed impact of monetary policy tightening and energy price increases.
The report also provides an analysis of rising US interest rates and how they affect emerging market and developing economies. Most of the rise in yields on two-year Treasury bonds over the past year and a half was driven by investors’ expectations of tightening US monetary policy to control inflation. According to the report, this particular type of interest rate increase is associated with negative financial impacts in emerging market and developing economies, including a higher likelihood of financial crises. In addition, these effects are more pronounced in countries with greater economic vulnerabilities. In particular, high-risk and newer markets, meaning countries with less developed financial markets and limited access to global capital, tend to see larger increases in borrowing costs; For example, sovereign risk spreads in high-risk or new markets are more than three times higher than those of other emerging market and developing economies.
In addition, the report provides a comprehensive assessment of the fiscal policy challenges facing low-income economies. These countries are currently in dire straits, as high interest rates have exacerbated the deterioration of their fiscal conditions over the past decade. Currently, the average public debt for these countries is about 70% of their GDP. And debt interest payments eat up an increasing proportion of its limited government revenues. The report reveals that 14 low-income countries are already in debt distress, or are at high risk of falling into debt distress, and that spending pressures have multiplied significantly in these economies. Adverse shocks such as extreme weather events and conflict are more likely to leave families in low-income countries in financial hardship than anywhere else because of weak social safety nets in these countries. On average, these countries spend only 3% of GDP on their neediest citizens, far below the average of 26% for developing economies.
Region prospects
East Asia and the Pacific: Growth is expected to pick up to 5.5% in 2023 and then fall to 4.6% in 2024.
Europe and Central Asia: Growth is expected to pick up slightly to 1.4% in 2023 before picking up to 2.7% in 2024.
Latin America and the Caribbean: Growth is expected to slow to 1.5% in 2023 before recovering to 2% in 2024.
Middle East and North Africa: The growth rate is expected to slow to 2.2% in 2023 before rebounding to 3.3% in 2024.
South Asia: The growth rate is expected to slow to 5.9% in 2023 and then to 5.1% in 2024.
Sub-Saharan Africa: Growth is expected to slow to 3.2% in 2023 and then pick up to 3.9% in 2024.
