Global economic slowdown imminent due to high debt levels, warns World Bank's chief economist

date_range 11-Oct-2023
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The World Bank's chief economist has issued a warning about an oncoming global economic slowdown, which would be fueled mostly by high levels of public and private debt acquired in the aftermath of the Covid epidemic. On Wednesday, the warning was issued, saying that developing countries with heavy debt, such as India, could be severely impacted.

The economist was also concerned about the impact of rising US interest rates on countries that have borrowed on the foreign market. This, combined with slowing trade growth and growing global protectionist measures, might pose serious problems to the global economy. The possibility of oil crisis exacerbates these dangers.

The importance of controlling inflation was underlined, particularly in emerging nations where its impacts might be more severe. Unchecked inflation, the analyst said, may hinder economic recovery efforts and lead to instability.

Despite the general worries, India's strong economic management over the last decade was praised by the chief economist. He praised India's advancements in infrastructure development, technological innovation, and the effective implementation of Goods and Services Tax (GST) reforms. He did, however, criticize India's high debt-to-GDP ratio and its poor female labor force participation rate, which is less than half that of China.

The economist lamented India's failure to capitalize on the "China Plus One" policy. This technique encourages enterprises to diversify their supply chains by adding another country as a trading partner alongside China, hence increasing commerce. Inability to capitalize on this opportunity may limit India's future economic progress.

Finally, the World Bank's chief economist advised states to address high debt levels and efficiently manage inflation in order to reduce the likelihood of a global economic slowdown. He emphasized the importance of swift action in order to secure long-term economic recovery and prosperity.