Type to search

World Bank Lifts China GDP Forecast and 2023 Global Outlook

Chinese state media have been happy to report that the World Bank has lifted its GDP growth forecast to 5.6%. It has also raised its 2023 global growth forecast

The World Bank has cut its forecast for China’s growth next year and warned that east Asia’s developing economies are set to expand at one of the lowest rates in five decades.
Economists expected China’s rebound from strict Covid controls would be “more sustained and more significant than it turned out to be”, World Bank chief economist for east Asia and the Pacific Aaditya Mattoo said. (Reuters file photo).


Chinese state media have been happy to report that the World Bank has lifted its GDP growth forecast to 5.6% this year from its projection 4.3% in January, after tough Covid restrictions were scrapped.

The multilateral lender has also raised its 2023 global growth forecast, saying on Tuesday that the US and other major economies had proven more resilient than anticipated.

But it warned that higher interest rates would cause a larger-than-expected drag next year and slower growth in the second half.

Real global GDP is set to climb 2.1% this year, the World Bank said in its latest Global Economic Prospects report. That’s up from a 1.7% forecast issued in January but well below the 2022 growth rate of 3.1%.

The development lender cut its 2024 global growth forecast to 2.4% from 2.7% in January, citing the continuing effects of tighter monetary policy, particularly in reducing business and residential investment.


China’s Big State Banks Cut Rates on Yuan Deposits


Monetary tightening

“Growth over the rest of 2023 is set to slow substantially as it is weighed down by the lagged and ongoing effects of monetary tightening, and more restrictive credit conditions,” it said.

“These factors are envisaged to continue to affect activity heading into next year, leaving global growth below previous projections.”

The bank predicted global growth rebounding to 3.0% in 2025.

In January, the World Bank had warned that global GDP was slowing to the brink of recession, but since then, strength in the labour market and consumption in the US had exceeded expectations as has China’s recovery from Covid-19 lockdowns.

US growth for 2023 is now forecast at 1.1%, more than double the 0.5% forecast in January, while China’s growth is expected to climb to 5.6%, compared to Covid-reduced growth of 3% in 2022.

The bank, however, halved its previous 2024 growth forecast for the US to 0.8%, and cut China’s forecast by 0.4 percentage point to 4.6%.

The euro zone got a forecast increase to 0.4% growth for 2023 from a flat outlook in January, but the forecast for next year was also cut slightly.


Banking sector stress

Recent banking sector stress is also contributing to tighter financial conditions that will continue into 2024, the lender said.

It cited one potential downside scenario where banking stress results in a severe credit crunch and broader financial market stress in advanced economies.

This would likely cut 2024 growth by nearly half to just 1.3% – the slowest pace in 30 years outside of the 2009 and 2020 recessions.

“In another scenario where financial stress propagates globally to a far greater degree, the world economy would fall into recession in 2024,” the bank added.

The bank said inflation is expected to gradually edge down as growth decelerates and labor demand in many economies softens and commodity prices remain stable.

But it added that core inflation is expected to remain above central bank targets in many countries throughout 2024.


  • Reuters with additional editing by Jim Pollard




Indonesia’s China-Backed Rail Link Hit by New Hiccups


China Seen Dropping Call for Global Banks to Share Debt Losses


Global Economy at Risk of Recession This Year, World Bank Warns


Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


AF China Bond