The UN expects global economic growth to slow down to 1.9% this year from 3% last year, one of the lowest rates in decades.
In 2024, the recovery is forecast to accelerate to 2.7%, provided that the macroeconomic headwinds begin to ease.
“A series of severe and mutually reinforcing shocks hit the global economy in 2022,” the report says. “While the effects of the COVID-19 pandemic are still being felt around the world, the war in Ukraine has triggered a new crisis, disrupting the functioning of food and energy markets and exacerbating food insecurity and malnutrition in many developing countries. High inflation has led to real income erosion and a global cost-of-living crisis that has pushed millions of people into poverty and economic hardship.”
In addition, in many countries humanitarian crises have been triggered by natural events, including heat waves, wildfires, floods and hurricanes.
All these shocks will put strong pressure on the global economy in 2023, experts believe, Interfax reports.
Chronically high inflation, averaging around 9% in 2022, has fueled aggressive monetary tightening in many developed and developing economies.
“The rapid increase in interest rates, especially by the US Federal Reserve, has had a global side effect, causing capital outflows and depreciation of currencies in developing countries, increasing pressure on the balance of payments and exacerbating risks in terms of debt sustainability,” the report said.
Financing conditions have tightened sharply amid high levels of private and public debt, which has led to an increase in the cost of servicing it, narrowing the room for fiscal maneuvering and increasing the risks of default on sovereign loans. Rising interest rates and a decline in purchasing power have weighed heavily on consumer confidence and investor sentiment, further dampening the immediate growth outlook for the global economy.
Global trade has weakened due to lower demand for consumer goods, the protracted conflict in Ukraine, and continued problems in supply chains.
“According to available forecasts, inflationary pressures will gradually decrease against the backdrop of a decrease in aggregate demand in the global economy. This would allow the Federal Reserve and other most influential central banks to slow down the pace of monetary tightening and eventually move to ease it. However, short-term economic the outlook remains highly uncertain due to the persistence of numerous economic, financial, geopolitical and environmental risks,” the report notes.
US GDP is expected to grow by 0.4% in 2023 after rising by 1.8% last year. Economic growth in the European Union is projected at 0.2% this year after rising 3.3% in 2022. China is projected to rise by 4.8% in 2023.
In the UK, the recession began in the second half of last year, and the economy is expected to contract by 0.8% in 2023.
Japan will be among the developed economies with the best performance. According to the UN, the country’s GDP will increase by 1.5% this year after growing by 1.6% in 2022.
The Russian military invasion of Ukraine has a strong impact on the short-term economic prospects of the CIS and Georgia. The contraction of the Russian economy and significant production losses in Ukraine are having spillover effects on the rest of the region.
However, in 2022 the Russian economy contracted less than originally expected. GDP declined by just 3.5%, driven by an impressive current account surplus, continued banking sector stability, and a reversal of the initially sharp monetary tightening.
Some economies in the region have benefited from the relocation of businesses and residents, as well as from capital inflows, with faster-than-expected growth in 2022. The improvement in the terms of trade supported growth in the region’s energy-exporting countries. Overall, the combined GDP of the CIS and Georgia (excluding Ukraine, which is not forecasted due to its uncertainty) is expected to contract by 1% in 2023 after declining by 1.6% last year, the report says.
