The world economy is on the way to a recession in 2023, says a researcher

The findings are more pessimistic than the International Monetary Fund’s latest forecast.

According to the Center for Economic and Business Research, the world is facing a recession in 2023. Higher borrowing costs in order to suppress inflation lead to a decrease in the number of economies.
The global economy topped $100 trillion for the first time in 2022 but will stagnate in 2023 as policymakers continue to battle rising prices, the British consultancy said in its annual World Economic League table.

“The world economy is likely to face a recession next year as a result of rising interest rates in response to higher inflation,” said Kay Daniel Neufeld, Director and Head of Forecasting at CEBR.

The report added that “The battle against inflation is not yet won. We expect central bankers to stick to their guns in 2023 despite the economic costs. The price of lowering inflation to more comfortable levels is a worse growth outlook for many countries in the years to come.”

The findings are more pessimistic than the International Monetary Fund’s latest forecast. The institution warned in October that more than a third of the world economy will shrink and that there is a 25 percent chance that global GDP will grow by less than two percent in 2023, which it defines as a global recession.

Even so, by 2037, world gross domestic product will double as developing economies catch up with richer ones. By 2037, the changing balance of power will see the East Asia and Pacific region account for more than a third of global output, while Europe’s share will drop to less than a fifth.

CEBR takes its core data from the IMF’s World Economic Outlook and uses an internal model to forecast growth, inflation and exchange rates.

China is now not poised to overtake the US as the world’s largest economy until 2036 at the earliest – six years later than expected. That reflects China’s zero-Covid policy and growing trade tensions with the slow-moving West, which have slowed its expansion.

CEBR originally expected the change in 2028, which they moved to 2030 in last year’s league table. The crossing point is now not thought to occur until 2036, and possibly later if Beijing tries to take control of Taiwan and faces retaliatory trade sanctions.

“The consequences of an economic war between China and the West would be several times more severe than what we saw after the Russian attack on Ukraine. There would almost certainly be a fairly severe global recession and a resurgence of inflation,” CEBR said.

“But the damage to China would be many times greater and it could torpedo any attempt to lead the world economy.”

It also provided that:

India will become the third largest $10 trillion economy in 2035 and the third largest in the world by 2032.

The UK will remain the world’s sixth largest economy, and France seventh, for the next 15 years, but Britain will no longer grow faster than its European peers due to “the absence of growth-oriented policies and the lack of a clear vision of its role outside the European Union”.

Developing economies with natural resources will get a “significant boost” as fossil fuels play an important role in the transition to renewable energy

The global economy is far from the $80,000 per capita GDP level at which carbon emissions decouple from growth, meaning further policy interventions are needed to achieve the goal of limiting global warming to just 1.5 degrees above pre-industrial levels.

(Other than the headline, this story was not edited by NDTV staff and was published from a syndicated feed.)

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