The world faces a recession by 2023, with higher borrowing costs shrinking many economies to deal with inflation, according to the Center for Economic and Business Research.
The global economy will surpass $100 trillion for the first time in 2022, but will stagnate in 2023 as policymakers continue to fight rising prices, the British consultancy said in its annual World Economic League table.
“The global economy will face a recession next year as a result of rising interest rates in response to high inflation,” said Kay Daniel Neufeld, director and head of forecasting at CEBR.
The report added, “The war against inflation is not yet won. We expect central bankers to stick to their guns in 2023 despite economic costs. The cost of bringing inflation down to a more comfortable level is a bleak growth outlook for many years to come.”
The findings are more pessimistic than the International Monetary Fund’s latest forecast. In October the agency warned that the global economy would shrink by a third and there was a 25% chance that global GDP would grow by less than 2% in 2023, defining it as a global recession.
Even so, by 2037, as developing economies catch up with the rich, global GDP will double. The changing balance of power will see East Asia and the Pacific region account for a third of world output by 2037, while Europe’s share will shrink to less than a fifth.
CEBR takes its base data from the IMF’s World Economic Outlook and uses an internal model to forecast growth, inflation and exchange rates.
China now won’t overtake the US as the world’s largest economy until 2036 – six years later than expected. This reflects China’s zero-covid policy and rising trade tensions with the West have slowed its expansion.
CEBR had originally anticipated the transition in 2028, which was pushed back to 2030 in the league table last year. It now thinks the cross-over point won’t happen until 2036, and could come even later if Beijing tries to take control of Taiwan and faces retaliatory trade sanctions.
“The consequences of an economic war between China and the West will be many times greater than what we saw following Russia’s attack on Ukraine. There will certainly be a sharp global recession and a rebound in inflation,” CEBR said.
“But the damage to China will be many times greater, and it could overwhelm any attempt to lead the world economy.”
It also predicts:
India will become the third largest $10 trillion economy by 2035 and the third largest economy in the world by 2032
In the next 15 years the UK will be the world’s sixth largest economy and France seventh, but “because of a lack of growth-oriented policies and a lack of a clear vision of its role, Britain will no longer grow faster than European countries. Outside the EU.”
Emerging economies with natural resources will receive a “significant boost” as fossil fuels play a key role in the transition to renewable energy.
The global economy is far from the $80,000 per capita GDP at which carbon emissions are decoupled from growth, meaning further policy interventions are needed to meet the goal of limiting global warming to 1.5 degrees above pre-industrial levels.
(Other than the headline, this story was not edited by NDTV staff and was published from a syndicated feed.)
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