2023 Economic Growth Forecast of Global and Major Economies

Edited by Wei Guojin / special report

Central banks around the world are raising interest rates one after another to curb inflation, which may cost them a lot in 2023.

(AFP)

The global economy has endured a difficult year in 2022. Decade-high inflation has weakened post-epidemic spending, prompting central banks to push up lending rates at an unprecedented pace. Paying a considerable price, coupled with China's anti-epidemic policy being caught off guard, Georgieva, chairman of the International Monetary Fund (IMF), said bluntly that this move will not only have a negative impact on the Chinese economy, but also on global growth. 2023 may be a more difficult year.

China may be a drag on the global IMF predicts that 1/3 of the economy will fall into recession

The IMF predicts that a third of the world's economies will fall into recession this year, while half of the European Union will follow suit.

In October last year, the IMF lowered its global economic growth forecast for this year to 2.7% on the grounds that the Ukrainian-Russian war, interest rate hikes, and inflationary pressure continued to drag growth. Outside of the financial tsunami, it was the weakest growth year.

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Georgieva warned that China's sudden abandonment of the strict zero-clearing policy and the rapid spread of the epidemic will cause China's economy to face a new blow. China's economic growth rate may be the same as the global growth rate for the first time in 40 years, or even lower. Become a drag on global economic activity rather than a force, "this has never happened."

Her view shows that the IMF may soon cut its global economic growth forecast again.

Morgan Stanley reported in November last year that global economic growth is expected to drop from 3% in 2022 to 2.2% in 2023 due to the continued impact of bloated retail inventories and inflation.

UBS predicts that the global economy will grow by 2.1% this year. Excluding the epidemic period and the global financial crisis, it will be the weakest since 1993. Of the 32 economies, 13 have experienced at least two quarters of contraction.

The Barclays Bank expects even lower, this year's global economic growth of only 1.7%.

Inflation remains high, countries have no intention of stopping interest rate hikes

The severity of the global economy in 2023 may depend on the next actions of central banks, the consequences of China's restart and energy prices.

The IMF called inflation "the most immediate threat to current and future prosperity," and while inflation has begun to decline in Europe and the U.S. as energy prices retreat, central banks have signaled no intention of stopping interest rate hikes anytime soon, stressing they don't know they will have to be lowered. How high, or how long, to bring inflation back to the 2% target.

If prices remain high, the central bank may take more aggressive measures than expected, putting further pressure on the global economy.

"We believe that a restrictive policy stance must be maintained for some time," Federal Reserve Chairman Jerome Powell said after a policy meeting in December.

In addition, the Ukrainian-Russian war will continue to add uncertainty to the forecast, especially for Europe, which may still face shortages, although it is gradually weaning off Russian energy.

The International Atomic Energy Agency reported that if Russia cut off natural gas supply to Europe, Europe may face a shortage of natural gas this winter.

Furthermore, if China's economy recovers, the demand for energy will rise.

"It's all interconnected, and one of the reasons why energy prices aren't higher is that the Chinese economy is unusually weak," said Diane Swonk, chief economist at KPMG.

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