S&P Global Market Intelligence has projected global real gross domestic product (GDP) growth to slow from 5.8% in 2021 to 2.8% in 2022, and 2% in 2023.
In a statement on Thursday (Sept 22), the firm said the 2023 growth rate is revised down 0.3 percentage point from last month’s forecast, reflecting weaker outlooks for the world’s largest economies — the eurozone, mainland China, Japan, and the US.
It said the global situation can be characterised as a growth recession, in which real GDP growth falls short of potential growth (currently near 3%) and unemployment rises.
It said the period of weakest growth and highest vulnerability will be in late 2022 and early 2023, when a new major shock could tip the world economy into a recession.
“While our forecast does not anticipate a global recession, parts of the world will experience a recession, including Western Europe and parts of Latin America (Argentina and Chile),” it said.
S&P Global said if price inflation diminishes over the next two years, approaching central bank targets, monetary policies will ease and economic growth will revive.
“We project global real GDP to pick up by 2.9% in both 2024 and 2025.
“The strongest gains will be in Asia-Pacific (4.6% in 2024 and 4.2% in 2025), led by India, Indonesia, Vietnam, the Philippines, and Bangladesh.
“These countries will benefit from regional free-trade agreements, competitive costs, and efficient supply chains,” it said.
US economy faces extended period of tepid growth
S&P Global said massive fiscal and monetary stimulus during the Covid-19 pandemic have sent US inflation to a four-decade high.
It said despite a slight easing since June, consumer price inflation remained high at 8.3% year-on-year in August.
It said the US Federal Reserve is now determined to bring inflation back to its 2% target, and will likely raise the federal funds rate to 4% or higher by the end of 2022.
The US economy is still expected to avert a recession, as tight labour markets support sustained growth in consumer spending.
However, rising financing costs will lead to significant declines in residential and commercial construction.
“We expect real GDP growth to slow from 5.7% in 2021 to 1.7% in 2022, and 0.9% in 2023, before edging up to 1.3% in 2024.
“With growth falling short of potential, the US unemployment rate will likely rise from 3.7% in July to 4.7% in 2025,” it said.
Source : Investing.com