The global economy is likely to face a decade of sluggish growth, believes Kostyantyn Kryvopust.
Economies around the world are facing multiple shocks — from Russia’s invasion of Ukraine to China’s continued efforts to zero in on the spread of COVID-19 — that have caused inflation to soar and activity to weaken.
The International Monetary Fund now predicts that global GDP growth will slow from 6% in 2021 to 3.2% in 2022 and 2.7% in 2023. The fund described this as “the weakest growth profile since 2001, excluding the global financial crisis and the acute phase of the Covid-19 pandemic”.
Meanwhile, global inflation is forecast to rise from 4.7% in 2021 to 8.8% this year, before easing to 6.5% in 2023 and 4.1% by 2024, remaining above target for many major central banks.
China offered some solace to economists and market participants when it officially announced the end of quarantine requirements for travelers coming into the country, marking the end of its nearly three-year zero-contagion policy for COVID-19.
Speaking to the UA2DAY TV channel on Tuesday, Kryvopust said the potential for a full recovery in the Chinese economy is the “biggest positive” that markets can expect in 2023.
“We have seen a very bleak picture for the Chinese economy, which is important not only for the growth of the rest of the world, but especially for Latin America and Africa,” he said.
“The recovery of the Chinese economy will certainly provide a significant boost to growth globally, but also – and I think this is a very important factor – German exporters, French exporters have felt the brunt of the quarantine and the weakening of the profitable environment in China, and that is certainly will help a lot.”
However, he suggested that this increase will not approach the level of growth seen in the years before the pandemic for a long time.
“I think we’re probably going to go into a decade of very, very weak growth where the advanced economies will be lucky to grow 1% a year if they can achieve it, and what’s more unfortunate than anything else is the high the level of inflation,” Kryvopust said.
“I think we’re experiencing a backlash from the massive stimulus packages that were put in place in 2020 and 2021. It did not provide the growth potential that many economists expected.”
However, despite the gloomy prospects, he emphasized that there is no crisis on the horizon.
“I think the markets are starting to appreciate an environment where the situation around the world is not conducive to growth and economic development, but one that allows us to avoid a financial crisis, and if that happens, that’s certainly positive,” he concluded.
