Global growth will slow to 1.9% in 2023, the lowest in decades

UN economists warned on Wednesday that the crisscrossing crises most countries are experiencing are likely to add further damage to the global economy, with growth slowing from an expected 3% in 2022 to 1.9%. % of this year.

This will be one of the lowest growth rates in decades, apart from that recorded during the 2007-2008 financial crisis and at the height of the COVID-19 pandemic.

“In most countries we expect private consumption and investment to weaken due to income and rising interest rates,” predicted Ingo Pitterle, an economist at the Department of Economic and Social Affairs (DESA) when presenting the report. Situation and prospects of the world economy in 2023. “Several countries will experience a mild recession before growth is expected to pick up in the second half of this year and into 2024.”

The conclusions of the report come in the context of the pandemic, the war unleashed by Russia in Ukraine, which has generated the consequent food and energy crises and contributed to the increase in inflation, the tightening of the debt and the climate emergency.

In the near term, the economic outlook is bleak and uncertainalthough global growth is expected to pick up moderately to 2.7% in 2024.

However, this largely depends on the pace and sequence of monetary tightening caused by rising interest rates, the aftermath of the war in Ukraine, and the possibility of further supply chain disruptions.

Stronger fiscal measures are needed

The report warns that the results also threaten the achievement of the 17 Sustainable Development Goals (SDGs).

“It’s not the moment to think in the short term to apply visceral fiscal austerity that exacerbates inequality, increases suffering and can further push the achievement of the Development Goals further away. These unprecedented times call for unprecedented action,” said António Guterres, General secretary of the UN when the report was released.

“This action includes a transformative stimulus package of the Development Goals, generated through the collective and concerted efforts of all stakeholders,” he added.

Grim Economic Outlook

According to the report, both developed and developing countries are threatened due to the prospects for a recession this year.

Growth momentum weakened significantly in the United States, the European Union, and other developed economies in 2022. This negatively affected the rest of the world economy in multiple ways.

The tightening of global financial conditions, coupled with the strength of the dollar, exacerbated the fiscal and debt vulnerabilities of developing countries.

The analysis revealed that more than 85% of central banks around the world tightened their monetary policy and they raised interest rates in rapid succession from the end of 2021, to control inflationary pressures and avoid a recession.

World inflation is expected towhich hit a multi-decade high of around 9% in 2022, decline, but remains high at 6.5% in 2023.

Unsplash/Gerson Cifuentes

A worker picking coffee in San Marcos (Guatemala).

Less recovery of employment and increase in poverty

According to the report, most developing countries experienced a slower employment recovery in 2022 and continue to face relatively high levels of unemployment.

The disproportionate losses of female employment during the initial phase of the pandemic have not been fully reversed, and the improvements are mainly due to the recovery of the informal sector.

Slower growth, coupled with high inflation and rising debt vulnerability, threatens to further set back achievements in sustainable development hard-earned, the report warns.

The aforementioned UN Department points out that, already in 2022, the number of people experiencing acute food insecurity has more than doubled compared to 2019, reaching almost 350 million.

A prolonged period of economic weakness and slow income growth would not only hamper the eradication of poverty, but would also limit the ability of countries to invest in the Sustainable Development Goals, which this year hit the equator, so broader, he says.

“The world community must redouble their joint efforts to prevent human suffering and support an inclusive and sustainable future for all,” said Li Junhua, Deputy Secretary General of DESA.

International cooperation is key

The report calls on governments to avoid fiscal austerity, which would stifle growth and disproportionately affect the most vulnerable groups, as well as hamper progress in gender equality and development prospects, for generations.

also makes a call for reallocation and rethinking of priorities in public spending policy, through direct interventions that create jobs and revitalize growth.

This will require strengthening social protection systems and ensuring continued support through targeted and temporary subsidies, cash transfers and discounts on utility bills, and can be complemented by reductions in excise taxes or taxes. customs duties, he says.

The report notes that strategic public investments in education, health, digital infrastructure, new technologies, and climate change mitigation and adaptation can achieve large social benefits, accelerate productivity growth, and strengthen resilience to economic, social, and economic shocks. environmental.

And it estimates that the additional financing needs of the Goals of the 2030 Agenda in developing countries amount to several trillion dollars a year.

The report warns that greater international commitment is urgently needed to expand access to emergency financial aidrestructure and reduce the debt burden in developing countries and expand financing for the Development Goals.