The growth of the global economy is still holding back, the forecasts for 2023 – according to the World Economic Outlook released by the International Monetary Fund meeting for the Spring Meetings in Washington – set world GDP at 2.8%, or -0.6% compared to 2022. The most sensitive setback is that of the advanced economies, whose growth halved compared to 2022, falling from 2.7% to 1.3%.
But there is an even more negative scenario in which if the financial sector were to suffer further setbacks after the collapse of Credit Suisse and the liquidity crisis of Silicon Valley Bank, the growth forecast would drop to 2.5% – and it would be the most low since 2001 – while the advanced countries would have a GDP below 1%.
In detail, the slowdown in Italy is noticeable even if in line with the Eurozone for this year (0.8%). According to IMF projections, growth in 2023 will be 0.7% in 2023 and 0.8% in 2024 (here, however, the Eurozone at +1.4%) Compared to last October’s estimates, the drop is significant, as much as 0 .9% on 2023. Among the advanced economies only Germany is worse than Italy with negative growth (-0.1%) but which in 2024 will rebound to 1.1%, and the United Kingdom (-0.3% and rebound to 1% in 2024). On the other hand, France has similar values to Italy, which however has not seen a worsening of estimates compared to October: growth in 2023 for Paris is set at 0.7%.
Emerging markets remain the lead, at 3.9% and 4.2%, estimates of close to nothing adjusted down from October valuations. The lion’s share for India (5.9% and 6.3%) and China (5.2% and 4.5%). Russia has found relief in the rise in raw energy prices and after minus 2.1% in 2022 this year is projected to be in positive territory, 0.7% which in 2024 will become 1.3%.
What the Fund’s experts have defined as “anemic growth” are essentially generating three factors: the restrictive monetary policy launched by the central banks to counter inflation; the consequent deterioration of financial conditions; the protracted war in Ukraine and growing geo-economic fragmentation.
Thanks to the increase in interest rates and the reduction in commodity prices, however, inflation will drop from 8.7% to 7%, but for “core” inflation (durable goods) the slowdown will be slower. The achievement of the objectives (inflation between 2 and 2.5%) by 2025 is not foreseen. The way to counter the price increase remains the lever of interest rates even if, underlines the IMF, the central banks they must be ready to use all the tools at their disposal to balance financial stability and the fight against inflation.
Therefore, the economic and geopolitical forces that shaped the world economy in 2022 remain the driving forces also for the current year, albeit with different intensity. Debt levels – writes the IMF in the presentation of the report – remain high, limiting the ability of political decision-makers to face new challenges. While commodity prices which have risen sharply following the Russian invasion of Ukraine have stabilized (but the fear that wheat, for example, could soar again has not vanished), the conflict continues and geopolitical tensions remain strong. These are all factors, such as disruptions in the global supply chain, which combined with the uncertainty generated by the financial sector as a whole are having consequences on global GDP.
Avoiding geopolitical fragmentation, resorting to all the instruments of multilateralism and allowing political decision-makers room for maneuver to limit the accumulation of debt are some of the suggestions of the Fund. Which however highlighted, as already done last Thursday by Kristalina Georgieva, the director, the risk that low growth (below 3% globally) will be a constant over the next five years, throwing the globe into a dynamic not seen for 40 years .