The 2023 World Economic Situation and Prospects report has just been issued, and U.N. economists present a gloomy and uncertain outlook for the coming year, with the global economy projected to grow at a particularly sluggish rate.
Multiple crises have converged to batter the world economy. The U.N. report cites a series of multiple and severe shocks for unleashing one of the lowest global economic outputs in recent decades.
It says the COVID-19 pandemic, the war in Ukraine, surging inflation and the climate emergency, among other crises, are setting back short-term growth prospects and threatening to undermine longer-term sustainable development in the poorer countries.
The report projects world output growth to drop from an estimated 3 percent in 2022 to 1.9 percent in 2023.
Ingo Pitterle, senior economist at the U.N. Department of Economic and Social Affairs, said private consumption and investment are expected to weaken in most countries due to declining income and higher interest rates. He noted several countries will see a mild recession before growth is expected to pick up in the next half of this year into 2024.
“The economic trajectory this year and next year will significantly be driven by trends in inflation and the monetary and fiscal policy response set,” Pitterle said. “The good news is that energy, food and fertilizer prices have already come down considerably from their peak in the middle of last year. However, food insecurity remains an immense global challenge. The number of people facing food insecurity has more than doubled since 2019.”
The report finds weaker economic growth in the United States, the European Union and other developed economies last year has adversely impacted the rest of the global economy.
Pitterle said most developing regions are expected to experience lower growth this year. The main exception, he said, is East Asia due largely to the rebound in China.
“Our growth outlook for Africa is relatively moderate,” he said. “But when we factor in the very high population growth, 4 percent annual growth is not enough to address the region’s massive development challenges.”
The report calls on governments to avoid fiscal austerity measures to get out of their economic doldrums. This, it says, would stifle growth and disproportionately affect the most vulnerable groups, set back progress in gender equality and stymie development prospects.
The report recommends reallocating public expenditure through direct policy interventions that will create jobs and reinvigorate growth. It says strategic public investments in education, health, new technologies and climate change mitigation and adaptation can bring about large social and economic returns.