He world Bank warned that if the United States banking crisis spreads, it could cause a global slowdown, it would further lower the “speed limit” of the international economy.
The foregoing is noted in the report “Falling prospects for long-term growth: trends, expectations and policies”, in which it warns that the top rate in the long run at which it can grow without causing inflation, it has plummeted to a three-decade low by 2030.
Although it is clarified that the report was prepared before the start of the crisis unleashed by the fall of the US Silicon Valley Bank two weeks ago, it already spoke of possible systemic banking crises that “reduce potential growth in the medium term.”
What does the World Bank think about the banking crisis?
The economy could grow more slowly if the banking crisis spreads
On the subject, the chief economist of the Equitable Growth, Finance and Institutions department, Ayhan Kose, pointed out that from his point of view: “We are closely following the evolution of the banking sector. At the beginning of the year, we released our Global Economic Outlook report and noted that when interest rates rise, there are consequences.”
Thus, periods of rapidly rising interest rates “have been associated with financial stress” that “in some cases translates into outright financial crisis,” he said.
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As we have mentioned in other informative notes of The Truth Newsthe World Bank report offers the agency’s first “comprehensive assessment” of long-term potential growth rates in the aftermath of the COVID-19 pandemic and Russia’s invasion of Ukraine.
As a result, between 2022 and 2030, average global potential GDP growth is expected to decline by about a third of the rate that prevailed in the first decade of this century, to 2.2% per year.
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