The problem with good news
At the start of the year, there is greater optimism that the worst-case scenarios feared in 2022 will not come to pass. Inflation is receding, though unevenly, which limits upward pressure on interest rates.
The US dollar has pulled back, providing relief to many emerging markets and US multinationals. The energy crisis has subsided, particularly in Europe, as the war in Ukraine grinds seemingly into stalemate. And China’s abrupt U-turn on its Covid policies means a much better growth outlook for the world’s second largest economy.
The International Monetary Fund therefore upgraded its global growth forecast for 2023 slightly. It still expects economic growth to slow this year, not least because of the lagged impact of record interest rate increases in 2022. But it does not think the slowdown will be as severe as it did a few months ago. It is projecting global growth of 2.9% in 2023, with an improvement to 3.1% in 2024. These numbers are below the long-term average of 3.5%, but ahead of annual global population growth of around 1%.
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