The global economy had a rocky year in 2022. As the worst of COVID-19’s effects on public health receded, the war in Ukraine and China’s tough “zero COVID” curbs injected new chaos into global supply chains. Food and energy prices soared as inflation in many economies hit four-decade highs. After a tumultuous year, the global economy heads into 2023 in choppy waters. Russian President Vladimir Putin’s war in Ukraine continues to roil food and energy markets, while rising interest rates threaten to smother the still-fragile post-pandemic recovery. On the positive side of the ledger, China’s reopening after three years of strict pandemic curbs offers a confidence boost for the global recovery — albeit tempered by fears that the rampant spread of the virus among the country’s 1.4 billion people could give rise to more lethal variants.
Inflation and interest rates Inflation is expected to decline globally in 2023 but nonetheless remain painfully high. The International Monetary Fund (IMF) has predicted global inflation will hit 6.5 percent next year, down from 8.8 percent in 2022. Developing economies are expected to have less relief, with inflation projected to only ease to 8.1 percent in 2023. “It’s likely that inflation will remain stubbornly higher than the 2 percent that most Western central banks have set as their benchmark,” Alexander Tziamalis, a senior economics lecturer at Sheffield Hallam University. “Energy and raw materials will remain expensive for some time. The partial reversal of globalisation means more expensive imports, shortages of labour in many Western countries leads to more expensive production, and green transition measures to combat the greatest threat our species faces are all leading to higher inflation than we’ve been used to through the 2010s.” Slowing growth and recession While price growth is expected to ease in 2023, economic growth is certain to slow sharply alongside rising interest rates, too. The IMF has estimated that the global economy will grow just 2.7 percent in 2023, down from 3.2 percent in 2022. The OECD has projected a less lofty performance this year of 2.2 percent growth, compared with 3.1 percent in 2022. Many economists are more pessimistic and believe a global recession is likely in 2023, barely three years after the downturn caused by the pandemic. In a column last month, Zanny Minton Beddoes, editor-in-chief of The Economist, painted a grim picture that was summed up by the article’s unequivocal title: “Why a global recession is inevitable in 2023”. Even if the global economy does not technically fall into recession — broadly defined as two consecutive quarters of negative growth — the IMF’s chief economist recently warned that 2023 may still feel like one for many people due to the combination of slowing growth, high prices and rising interest rates. “The three largest economies, the US, China and the euro area, will continue to stall,” Pierre-Olivier Gourinchas said in October. “In s
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