The World Economic Situation and Prospects 2023, produced by the United Nations Department of Economic and Social Affairs (UN DESA), does not start with an encouraging note. In its pages, we can see that the world economy faced a series of severe shocks in 2022 as it approached the halfway point for achieving the 2030 Sustainable Development Goals (SDGs).
Various factors, including the ongoing impact of the COVID-19 pandemic, the war in Ukraine, the climate crisis, and high inflation, caused these shocks. These have led to disruptions in food and energy markets. This has worsened food insecurity and malnutrition in many developing countries. Moreover, promoting the erosion of real incomes, and a global cost-of-living crisis, pushing millions into poverty and economic hardship.
The climate crisis has also had a heavy toll on the world economy, with heat waves, wildfires, floods, and hurricanes causing massive economic damage and generating humanitarian crises in many countries. These sudden events will continue to weigh heavily on the world economy in 2023, with persistent inflation prompting aggressive monetary tightening in many developed and developing countries.
Overall, global growth is projected to decelerate from an estimated 3 per cent in 2022 to only 1.9 per cent in 2023, one of the lowest growth rates in recent decades. The near-term economic outlook remains highly uncertain, with myriad economic, financial, geopolitical, and environmental risks persisting. However, if some macroeconomic headwinds begin to subside next year, global growth is forecast to pick up to 2.7 percent in 2024 moderately.
Core ideas in the World Economic Situation and Prospects 2023:
Among the set of main issues included in the report, we can sum them up as follows:
- A sharp downturn in most developed economies
- A worsening outlook in most developing regions
- Central banks vigorously fighting inflation
- Mounting debt and balance of payment vulnerabilities
- New challenges for macroeconomic policymaking
- The risk of overtightening monetary
- Revisiting inflation targets
- The imperative of avoiding fiscal austerity
- Fiscal policy for stimulating growth and SDG progress
- Stronger international cooperation is imperative
The most crucial issue is that growth is projected at 4.4 per cent in 2023, about the same rate as last year and significantly below the 7 per cent growth target set in SDG 8. Regional economies are projected to experience significant challenges in 2023.
East Asia & China
China is projected to improve slightly in 2023 after a weak-than-expected performance in 2022, with the Government abandoning its zero-COVID-19 policy and easing monetary and fiscal policies. Reopening is expected to be rough, likely below the pre-pandemic rate of 6-6.5%.
East Asia’s economic recovery will be fragile, with GDP growth expected to reach 4.4% in 2023. However, a weakening export demand, rising living costs, and tightening global financial conditions lead to contractionary monetary and fiscal policies. China’s expected recovery will support growth, but any surge in COVID-19 infections may lead to slowdowns.
South Asia’s economic outlook has deteriorated due to high food and energy prices, monetary tightening and fiscal vulnerabilities. GDP growth is projected to moderate in 2022 and 2023. Meanwhile, India is expected to remain strong at 5.8%. The IMF received financial assistance requests from Bangladesh, Pakistan and Sri Lanka in 2022.
In Western Asia, oil-producing countries have emerged from the economic slump: due to high prices, rising oil output and tourism sector recovery. However, non-oil-producing countries’ recovery was weak due to a lack of access to international finance and fiscal constraints. Additionally, given worsening external conditions, average growth is expected to slow from 6.4 percent in 2022 to 3.5 percent in 2023.
Africa’s economic growth is projected to slow due to: the global environment, weak demand from key trading partners, high energy and food prices, rising borrowing costs and weather events. As debt service costs rise, many governments seek bilateral and multilateral assistance. Economic growth is forecast to slow from 4.1 percent in 2022 to 3.8 percent in 2023.
Latin America and the Caribbean
Latin America and the Caribbean face a challenging outlook due to external conditions, limited macroeconomic policy space and high inflation. Regional growth will slow to 1.4% in 2023, and labour market prospects are challenging. Argentina, Brazil and Mexico will grow at very low rates due to tightening financial conditions, weakening exports and domestic vulnerabilities. Reducing poverty is unlikely in the near term.