China’s Recovery Drives Growth Forecasts Upward for 2023

The World Bank is raising its global growth forecasts for this year to 2% thanks in part to the improved outlook for China following the end of the pandemic blockades. China is expected to grow 5.1% this year, eight-tenths more than the figure estimated in January. However, in the coming months, new challenges could arise in the shape of higher oil prices and a poor perception of banking health following the bankruptcies of several entities. 

David Malpass, President, World Bank Group, says that the organization revised its global growth outlook slightly upward for 2023 to 2%, up from January's forecast of 1.7%. However, the slowdown from the more robust 2022 expansion will increase borrowing difficulties for developing countries. "This is an upward revision and is partly due to the improved outlook in China after they lifted the blockade,” says Malpass. The increase in the world’s growth forecast is also because "the advanced economies are doing a little better than they seemed to be doing in January, and, for example, in the US and the EU, consumption has been maintained better than expected," Malpass explains.

Advanced economies are also doing slightly better than the World Bank forecasted in January. However, the group warned that turmoil in the banking sector and higher oil prices could again put downward pressure on growth prospects later this year. A bank asset maturity mismatch will take some time to resolve, and banks will likely reduce lending. Goldman Sachs said last week that it raised its forecast for China's gross domestic product (GDP) growth for this year to 6% from 5.5%. Strong recovery in sectors sensitive to the COVID-19 pandemic and broad-based improvement in activity data in the first two months of 2023 underpin the improved outlook, Goldman Sachs says in its research note.

With these statements, Malpass and Kristalina Georgieva, Director, International Monetary Fund (IMF), inaugurated the spring meetings in which ministers and directors of financial institutions will participate to discuss the state of the global economy and the main challenges ahead. The topics to be discussed include debt, the need for debt restructuring and a shift to "a more transparent system," Malpass says: "The ultimate goal here is that, if poorer countries go into debt on commercial terms, the benefits should be known and assessed and go to the country's people, and that has not been happening."