Global economic growth forecast to slow

The World Bank (WB) on June 6 released its biannual Global Economic Prospects report, in which it assessed that the global economy is in a "precarious" state.

The boost is fading.

The world economy will grow 2.1% in 2023 amid continued tightening of monetary policy to curb inflation, the report said, up from the 1.7% forecast by the World Bank in January but down from 3.1% growth in 2022. The World Bank further cut its 2024 growth forecast from 2.7% to 2.4% due to the lagged impact of tightening monetary policy by central banks and increased credit conditions, which have weakened investment, according to Reuters.

Containers are loaded onto ships at Ningbo port, China.

The report shows that the East Asia and Pacific region is expected to grow 5.5% this year, up from 3.5% last year, as China’s recovery offsets a slowdown in most other economies in the region. However, excluding China, the region is forecast to grow only 4.8% this year, down from 5.8% in 2022, as the boost from post-Covid-19 openings begins to fade in economies such as Malaysia, the Philippines and Vietnam. In 2024, the region’s growth is forecast to be 4.6% as the impact of China’s openings fades.

Risks to the region's growth outlook include tighter-than-expected global financial conditions, persistently high inflation, a sluggish real estate sector in China, geopolitical tensions and, especially, natural disasters in smaller economies, the World Bank said.

Long road ahead

Meanwhile, the Organization for Economic Cooperation and Development (OECD, headquartered in France), a forum whose members are mostly high-income economies, on June 7 released a report on global economic growth prospects in 2023. Accordingly, the organization forecasts that the world economy will grow by 2.7% this year, a slight increase compared to the 2.6% forecast in March. However, this figure is still lower than the growth rate recorded by the OECD in 2022 of 3.3%.

The report cited falling energy prices, easing supply chain bottlenecks and China's earlier-than-expected reopening as contributing factors to the recovery. However, core inflation remains higher than expected and could force central banks to raise interest rates further. The real estate and financial sectors are said to be starting to feel the growing pressure from higher interest rates.

Economists from the World Bank and OECD agree that the global economy has a long way to go to achieve strong and sustainable growth. However, World Bank President Ajay Banga noted: "It is important to remember that growth forecasts are not destiny. We have an opportunity to turn things around, but it will require all of us to work together."

China's exports fall sharply

China's General Administration of Customs said yesterday that exports fell 7.5% in May, the first decline since February and a sharp reversal from an 8.5% increase in April. Rising global inflation, the threat of recession and geopolitical tensions with the United States have weakened purchasing power for Chinese products. Observers say the figures are among several signs that China's post-Covid-19 economic recovery is faltering.

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