March 15, 2023

Modest Global Growth and Challenges Ahead in 2023, Says EIU

According to a report about the global economic outlook for 2023 published by the Economist Intelligence Unit (EIU), the global economy is proving resilient amid severe economic headwinds. However, the UK-based organization, says global gross domestic product (GDP) growth will slow sharply in this year with global inflation remaining stubbornly high. Moreover, the report notes that risks abound for the global economy including fears about global food supplies.

Additional key findings from the report include:
  • The EIU expects global economic growth to slow sharply in 2023, reflecting persistent headwinds stemming from the ripple effects of the war in Ukraine, as well as high inflation and rising interest rates.
  • The EIU's forecast for global growth stands at 2% (up from 1.9% last month). This upward revision reflects an improvement to our US growth outlook, which the EIU now forecasts at 0.7% for 2023 (up from 0.3% previously).
  • The EIU forecasts that the Chinese economy will grow by 5.7% in 2023. The recovery will be consumer-led as the exit from the country's zero-covid policy unleashes pent-up demand for goods and services (including outbound tourism).
  • The euro zone has avoided recession in the winter of 2022/23, owing to lower than expected energy demand due to mild temperatures. However, high inflation continues to weigh on spending—the EIU forecasts GDP growth of just 0.7% in the bloc.
  • The EIU expects a moderate global recovery in 2024, with real GDP growth of 2.5%. However, growth in OECD economies will remain subdued, at a forecast 1.5%. By contrast, the EIU forecasts growth of 4.1% in non-OECD economies.
  • Inflation was a major driver of our forecasts in 2022, and this will continue to be the case in 2023. The EIU expects major central banks to end their tightening cycles by mid-year as inflation slows, but rates will remain high in 2023-24.
  • Despite sky-high interest rates, global inflation will subside only gradually, from an estimated 9.3% in 2022 to 6.7% in 2023 and 4.3% in 2024. Prices will remain high in level terms, even after inflation subsides, fueling the risk of social unrest.
  • Oil prices will remain high in 2023, owing to continued disruption from the war in Ukraine and rising Chinese demand. The EIU expects oil (dated Brent Blend) to trade above US$80/barrel until 2025.

I appreciate how this report provides businesses with foresight of the critical global trends and threats that will shape interest rates, inflation and economic activity in the year ahead. What do you think about the report's findings?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

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