As the global economy faces an extended cooling-off period, real GDP growth is projected to slow to 2.9 per cent in 2022 and 1.5 per cent in 2023, said global financial information and analytics services provider S&P Global Market Intelligence in a note. The months ahead will likely bring recessions in Europe and North America – the economies that produce half of the global output. Growth contractions in these regions will dampen growth in other parts of the world through trade and capital flows.
The S&P Global Market Intelligence forecast does not envision a global economic recession. “Persistent inflation and expectations of further monetary tightening have pushed up interest rates on government bonds, corporate debt, mortgage loans, and consumer credit. The result is a broad slowdown in household and business spending,” Sara Johnson, Executive Director, Economic Research at S&P Global Market Intelligence said in a note on Thursday.
“With moderate growth in Asia Pacific, the Middle East, and Africa, the world economy can avoid a downturn, but growth will fall short of potential in 2023,” Johnson added. The ongoing monetary policy tightening by various central banks will eventually succeed in cooling inflation, allowing interest rates to retreat and global economic growth to pick up to a 3 per cent pace in the mid-2020s. Major central banks are making a determined effort to subdue inflation through interest rate hikes.
On the US economy, it continues to forecast a “recession” in the first half of 2023, led by declines in residential investment, commercial construction, and consumer spending on goods. “The US unemployment rate will likely rise from 3.7 per cent in October 2022 to a high of 5.7 per cent at the end of 2023. After a 0.2 per cent drop in 2023, we predict real GDP to increase 1.3 per cent in 2024 as inflation subsides and interest rates retreat,” it added.