A lot of surveys and research by the IMF, the OECD, the Economist, Forbes, S&P and many others goes into forecasting the next economic horizon. They analyse data, trends and social events in order to understand global economic developments for both the short and the medium term. We provide a collective overview of the world economy and the core issues affecting most industries and economies that are of the highest interest across businesses and organisations in Europe and way beyond our borders.
In short, rising rates, energy insecurity, the effects of the pandemic, the Russian invasion of Ukraine, and slow growth in China, are affecting growth universally. Comparatively, Asia-Pacific is the only region across the globe that remains a stronger performer. As central banks struggle with inflation, economic confidence is slowing down. In fact, some regions experience a slight recession. On the other hand, labour market data has been positive and has endured all the above in a quite amazing way.
Most economists remain cautious in their GDP growth forecasts for 2023 and also raising inflation estimates – which are effectively a universal economic disadvantage. The outlook for a near-term recovery is also not clear for the following three reasons. The U.S is facing an economic overheating that should adjust in the near term. Europe is undergoing a massive energy reconfiguration that will take time to complete. Conversely, China has decided to let go of its zero Covid strategy and this should help boost the global economy as early as 2023.
And of course, all these are in regards to the strongest economies in the world. There are also specific indications that developing or at least more vulnerable economies might go through an increasing risk of sovereign debt. Therefore, global economic activity is experiencing a broad and sharper than expected slowdown, with inflation higher than seen in several decades. The cost of living is stressing financial conditions in most regions and growth is forecasted at 2.7% in 2023. The highlights are summarised in the bullet points below:
- UK Stagflation
- EU Contracting
- US Overheating
- High Energy Prices
- Geopolitical War Stress
- Supply Chain Issues Remain
- China Loosening Covid Policy
- Japan Influencing Yen Pricing
It appears that the global economy is not in its best shape right now and in general, the global growth outlook is challenging. Inflationary pressures have intensified and the war in Ukraine has pushed up energy and food commodity prices even higher. Also, the high price of energy has triggered increased prices across a broad basket of goods and services. But, tight monetary policies and slowing growth will eventually help restrain inflation. In 2024, the global economy will most likely experience a (modest) higher growth than 2023, as the pandemic after-effects, massive inflation rates, and monetary tightening will collectively let go. Nevertheless, growth rates in 2024 and beyond will likely remain below the pre-pandemic levels.