Global economy snapshot: World growth forecasts slashed

Global GDP is expected to increase 1.7 per cent in 2023, half the pace that was forecast in June. PHOTO: AFP

NEW YORK – Economists from Wall Street to the World Bank are increasingly convinced that most parts of the world will be in a recession in 2023, against a backdrop of sticky inflation and higher interest rates.

Global gross domestic product (GDP) will probably increase 1.7 per cent in 2023, about half the pace that was forecast last June, according to the Washington-based lender. That would be the third-worst performance in the last three decades or so, after the contractions of 2009 and 2020.

Bloomberg Economics sees worldwide growth of 2.4 per cent for 2023. Excluding the crisis years of 2009 and 2020, that is the slowest rate since 1993.

So far, the two biggest economies in Europe have surprised to the upside, as consumers buoyed year-end GDP momentum in Britain and Germany. In the United States, headline inflation fell to the slowest annual pace since October 2021.

Here are some of the latest developments in the global economy:


The World Bank slashed its growth forecasts for most countries and regions, and warned that new adverse shocks could tip the global economy into a recession. The bank, which also cut its growth estimates for 2024, said persistent inflation and higher interest rates are among the key reasons.

After the shocks of 2022, a recession for large parts of the world in 2023 seems a safe bet. Tougher to gauge, and more frightening, is the long-term impact of money itself being repriced and the assumptions that underlie more than 30 years of global economic history being overturned.

Central banks are not yet giving up their inflation fight, with the peak in interest rates still to come in most economies. But pauses will come at some point in 2023 – and perhaps even pivots. Policymakers in Romania, Serbia, South Korea and Peru raised rates last week.


Europe’s two biggest economies may have succeeded in skirting a recession in the fourth quarter, defying downbeat expectations and offering hope of similar feats throughout the advanced world. Consumer-fuelled momentum buoyed both Germany and Britain, according to official GDP estimates.

French President Emmanuel Macron’s government presented a plan to gradually raise France’s minimum retirement age from 62 to 64 by 2030, defying labour unions that have pledged to resist the change with strikes and protests. Making the French work longer is essential to boost relatively low employment rates among seniors and avoid persistent deficits in a system funded by worker contributions, the government has said.

US & Canada

Inflation continued to slow in December, adding to evidence that price pressures have peaked, and putting the US Federal Reserve on track to again slow the pace of interest-rate increases. The overall consumer price index fell 0.1 per cent from the prior month, with cheaper energy costs fuelling the first decline in 2½ years.

Canada’s largest cities are getting bigger and more expensive, forcing hundreds of thousands of people to search for affordable housing elsewhere. Toronto, the country’s biggest urban centre, saw nearly 100,000 people leave the area over a one-year period to July 1, while Montreal and Vancouver saw about 35,000 and 14,000 people exit, respectively.


Bank of Japan watchers see a policy shift coming much sooner than previously thought, following December’s surprise adjustments. While a survey of 43 economists showed all but one predicting the central bank would leave policy unchanged this week, about 38 per cent of respondents now forecast moves either in April, when a new governor takes the helm, or in June. That’s a jump from 15 per cent in December’s poll.

After a near-certain contraction in 2022 for the third time since 2019, Hong Kong’s economy is coming back stronger in 2023, and may even grow faster than the economy of rival financial hub Singapore for the first time in more than a decade.

Chinese oil consumption is expected to hit a record in 2023 as the world’s biggest importer leaves the straitjacket of zero-Covid behind, bolstering the global demand outlook and aiding prices. Oil bulls, of which there are many, have built a large part of their outlook on growth in Chinese demand, with Goldman Sachs Group’s Jeffrey Currie saying that crude is the “best reopening play”.

Emerging markets

Brazil’s consumer prices rose much more than expected in December. The central bank is holding its interest rate high and warns that plans to loosen public spending rules could pressure inflation.

China’s trade deficit with Russia reached a record US$38 billion (S$50 billion) in 2022 as global energy prices surged following Russia’s invasion of Ukraine. The world’s second-largest economy purchased US$114.1 billion worth of goods from Russia in 2022, up 44 per cent from a year earlier. BLOOMBERG

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