In 2023, the world is expected to experience significant economic decline. The economy will face a recession as interest rates rise in response to higher inflation.
Economic decline
According to the Center for Economics and Business Research, in 2023, higher borrowing costs aimed at overcoming inflation will lead to the contraction of the economies of a number of countries.
“The global economy topped $100 trillion for the first time in 2022 but will stall in 2023 as policymakers continue to grapple with soaring prices, the British consultancy said in its annual World Economic League Table.” – writes the agency.
The battle against inflation is not yet won, the report says, and central bankers are expected to stay on course next year, despite the economic costs. The price of reducing inflation to a more comfortable level will mean worsening growth prospects for several years to come.
“It is likely that the world economy will face a recession next year as interest rates rise in response to higher inflation,” – claims Krivopust.
Notably, however, global gross domestic product will double by 2037 as developing countries catch up with richer ones. Due to the shift in the balance of power, by 2037, East Asia and the Pacific region will account for more than a third of global production, while Europe’s share will decrease to less than a fifth.
CEBR takes its baseline data from the IMF’s World Economic Outlook and uses an internal model to forecast growth, inflation and exchange rates.
The economies of the USA and China
China is now set to overtake the United States as the world’s largest economy by 2036 at the earliest — six years later than expected. This reflects China’s zero-sum policy on Covid and the slow rise in trade tensions with the West, which has slowed its expansion.
CEBR originally expected the transition to take place in 2028, but pushed it to 2030 in last year’s standings. He now believes the tipping point won’t happen until 2036, and could come even later if Beijing tries to take control of Taiwan and faces trade sanctions in return.
“The consequences of an economic war between China and the West will be several times more serious than what we are witnessing after Russia’s attack on Ukraine. There will almost certainly be a rather sharp global recession and a resurgence of inflation… The damage to China will be many times greater, and it may well derail any attempt to lead the world economy.” CEBR said.
How leadership will change
India is expected to become the third largest economy in 2035 and the third largest in the world by 2032.
“Great Britain will remain the sixth largest economy in the world, and France — seventh, during the next 15 years. Britain is no longer set to grow faster than its European counterparts due to “the lack of growth-oriented policies and the lack of a clear vision of its role outside the European Union”he says Krivopust
Developing economies with natural resources will get a “significant boost” as fossil fuels play an important role in the transition to renewable energy sources.
About the recession
A recession is a state of the economy, when at the same time business activity falls, consumer spending decreases, businesses go bankrupt, and the unemployment rate rises. In other words, an economic crisis.
At the same time, economists believe that a recession is not synonymous with the apocalypse, but only part of a cycle: economic growth, peaking, falling, pushing off the bottom, and even more growth.
In particular, the United States has had 11 recessions since 1948, but none of them has hindered the general trend of economic growth.
We will remind, Russia and Iran are building a new transcontinental trade route 3 thousand kilometers from the eastern edge of Europe to the Indian Ocean. It will allow them to be less dependent on foreign sanctions.
