EIU expects modest global growth of 2.1% in 2023; but slowdown persists
The global economy has demonstrated remarkable resilience thus far in 2023, despite formidable challenges stemming from the ripple effects of the war in Ukraine and high global inflation, according to the Economist Intelligence Unit (EIU).
In its latest Global Economic Outlook 2023 Update, the EIU highlights Europe’s ability to avoid a deep recession during the winter of 2022/2023. This outcome was partly attributed to unusually warmer temperatures and the swift transition to alternative energy sources following Russia’s decision to curtail gas flows. Furthermore, the report notes that consumer spending in the United States has surpassed EIU’s expectations, with a strengthening labor market and robust consumer expenditure in early 2023.
The EIU also highlights China’s departure from its government-mandated zero-Covid policy, which has provided support to global economic activity. As a result of these factors, the EIU forecasts global growth to reach a modest, albeit not anaemic, rate of 2.1% in 2023.
However, the projected growth rate still signifies a slowdown in comparison to previous years. The EIU emphasizes that the full-scale war in Ukraine continues to impact the global economy through heightened commodity prices, disruptions in supply chains, and Russia’s manipulation of energy supplies. This situation is expected to persist throughout 2023, with the conflict evolving into a protracted struggle lacking a clear resolution.
Germany and Central Europe are experiencing the economic repercussions of the war particularly intensely, as energy-intensive industries grapple with maintaining their competitiveness in the face of ongoing challenges, according to the EIU.
In the United States, the EIU maintains its forecast of a sharp deceleration in annual growth, with a projected rate of only 1% for the current year. The pace of consumer spending is deemed unsustainable amidst high inflation and a steep rise in interest rates. Meanwhile, China’s recovery has fallen short of initial expectations, despite a strong rebound in consumer activity following the lifting of the government’s zero-Covid policy.
Looking to Africa, the EIU projects a GDP growth rate of 2.7% for the region. However, many international organizations have divergent projections for Ghana’s economy, with estimates ranging between 1.8% and 2.4% growth for 2023.
While the global economy faces ongoing challenges and uncertainties, the resilience observed in the face of adverse conditions underscores the intricate interplay between geopolitical events, consumer dynamics, and policy decisions. Monitoring these factors will be critical as economies strive to navigate the evolving global landscape.
