How will the world’s major economies fare in 2023?
The global growth rate in 2023 is set to reach 2.9%, according to the IMF’s (International Monetary Fund) January update. This represents a decrease from the 3.2% initially forecasted for 2022. This is also a 0.2% increase since October’s IMF update, fuelled mainly by factors such as China’s reopening, higher demand, and slowing inflation in some countries. The graph below shows the projections for selected economies worldwide.
Russia’s invasion of Ukraine continues to dominate the news, and a global recession is a concern for 2023. High inflation caused by rising energy costs has impacted GDP growth, and tighter monetary policy in the U.S. with increased interest rates has historically led to a downturn one to two years later.
Energy prices are crucial for Europe, where the average projected GDP growth is 0.7%, a sharp decline from the 2.1% forecast last year. The IMF forecasts Germany and Italy to have a slight increase at 0.1% and 0.6%, respectively.
Meanwhile, China’s growth is predicted to rise 5.2% in 2023, but its real estate sector shows signs of weakness.
Downturn Predicted for the U.K
The UK is the only G7 economy that is forecast to shrink in 2023 – with the IMF predicting a 0.6% contraction.
The IMF said that while the prospects for every other member of the G7 group of leading developed nations had improved or remained unchanged since October, rising interest rates and higher taxes had made the outlook for the U.K. much less promising.
The IMF has stated that 2023 will feel like a recession for most of the world economy, but whether it will lead to recovery or a sharp decline remains uncertain. Lower-than-expected energy prices and strong private sector balance sheets are currently propping up the global economy. However, inflation remains a concern, and central banks may have to take measures to control it, which may impact economic growth and financial markets. The direction of the economy in 2023 remains uncertain.
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