The world is facing a recession in 2023. Higher borrowing costs aimed at tackling inflation are causing a number of economies to contract, according to the Center for Economics and Business Research.
The global economy passed $1[ads1]00 trillion for the first time in 2022 but will stall in 2023 as policymakers continue to battle rising prices, the British consultancy said in its annual World Economic League Table.
“It is likely that the world economy will face recession next year as a result of the rate hikes 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 cost of bringing inflation down to more comfortable levels is poorer growth prospects for a number of years to come .”
The findings are more pessimistic than the latest forecast from the International Monetary Fund. This institution warned in October that more than a third of the world economy will contract and there is a 25% chance that global GDP will grow by less than 2% in 2023, which it defines as a global recession.
Still, by 2037, the world’s gross domestic product will have doubled as developing economies catch up with the wealthier ones. The changing balance of power will see East Asia and the Pacific region accounting for over a third of global production by 2037, while Europe’s share shrinks to less than a fifth.
CEBR obtains its basic data from the IMF’s World Economic Outlook and uses an internal model to forecast growth, inflation and exchange rates.
China is now not set to overtake the US as the world’s largest economy until 2036 at the earliest – six years later than expected. It reflects China’s zero-Covid policy and rising trade tensions with the West, which have slowed expansion.
CEBR had originally expected the switch in 2028, which it pushed back to 2030 in last year’s league table. It now believes the tipping point won’t happen until 2036 and could come even later if Beijing tries to take control of Taiwan and faces retaliatory trade sanctions.
“The consequences of economic warfare between China and the West would be several times more severe than what we have seen after Russia’s attack on Ukraine. There would almost certainly be a fairly severe world recession and a resurgence of inflation,” CEBR said.
“But the damage to China would be many times greater, and this could well torpedo any attempt to lead the world economy.”
It also predicted that:
India will become the third largest $10 trillion economy by 2035 and the world’s third largest by 2032
Britain will remain the world’s sixth largest economy, and France seventh, over the next 15 years, but Britain will no longer grow faster than its European peers due to “an absence of growth-oriented policies and the lack of a clear vision of its role outside the EU .”
Emerging economies with natural resources will receive 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 where carbon emissions are decoupled from growth, meaning further policy interventions are needed to meet the goal of limiting global warming to just 1.5 degrees above pre-industrial levels.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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