The Atradius Chief Economist, John Lorié, assesses the economic landscape during this challenging time for the global economy.
Facing an unprecedented mix of challenges, the global economy is facing a sharp deterioration of growth. After 2023, the picture is slightly better, as we expect that current actions of central banks and normalisation of supply chains help to alleviate price pressures.
In this edition of the Atradius Economic Outlook we look at the economic challenges facing the world’s regions. High inflation is the primary challenge, and one which impacts the entire world. The shadow of high inflation and economic stagnation, stagflation, hangs low across many economies as the cost-of-living crisis unfolds, entangled by volatile food and energy prices, the war in Ukraine, the ongoing effects of the pandemic, high inflation and low growth. Global GDP growth is forecast to decrease to 1.2% in 2023, down from 2.9% in 2022.
Stagflation is expected to gradually dissipate in 2023 as consumer inflation comes down. Global growth is expected pick up again by 2.9% in 2024, especially if the negative effects of the war in Ukraine begin to abate.
2023 is likely to be a difficult year for emerging markets and advanced economies alike. We expect GDP growth in emerging markets to decelerate to 2.9% in 2023, from 3.6% in 2022. For those with high private or government debt, additional challenges will be caused by interest rates. Many advanced markets are also facing growth contraction next year, with predictions of -0.1% for the eurozone and a 0.4% economic contraction for the US.
Our forecast is surrounded by an unusual level of uncertainty. A major risk is a persistence of high inflation, driven by new energy price shocks and a wage-price spiral. This would trigger central banks into more drastic actions to curtail inflation, with a dire impact on growth. Indeed, in this scenario, global GDP growth in 2023 would halve to 0.6%.
Further detail on the state of the global economy can be found in the December 2022 edition of the Atradius Economic Outlook.