World economy to slow down in 2023; remain sluggish in 2024: Moody's

The global economy is on the verge of a downturn amid extraordinarily high levels of uncertainty amid persistent inflation, monetary policy tightening, fiscal challenges, geopolitical shifts, and financial market volatility, credit ratings agency Moody’s said in a press release.

Real gross domestic product (GDP) growth of the G-20 economies is expected to decelerate to 1.3 per cent in 2023, significantly lower than the previous estimate of 2.1 per cent and down from an estimated 2.5 per cent growth this year.

Declining economic activity in advanced economies, notably in Europe and North America, will drive the sharp moderation in 2023 growth. In 2024, global economic activity will accelerate but only to a below-trend 2.2 per cent growth rate.

The decisive end to the decade-long era of low interest rates and quantitative easing has generated large financial losses in asset values around the world, raised dollar funding costs, and widened credit spreads. So far, the adjustment to higher rates has come without a large systemic financial event with global implications, and Moody’s baseline forecasts assume that central banks will avoid a disorderly tightening of financial conditions.

Moody’s growth forecasts have been lowered for the US (Aaa stable), China (A1 stable), several European countries, Japan (A1 stable), and India (Baa3 stable), among others. Growth outcomes of the G-20 emerging market economies will vary depending on economic structures. For instance, large domestically driven emerging market economies such as India and Brazil (Ba2 stable) will be less vulnerable to weakening G-7 growth than will export-oriented countries, added the release.

The Russia-Ukraine conflict will remain the central geopolitical risk to the larger macroeconomic picture. While Moody’s assigns a very low probability to the potential for the conflict to broaden beyond Ukraine’s borders, such an event would mark a significant escalation, creating further and severe downside economic risks. Geopolitical considerations will increasingly drive economic policies globally, as great-power relationships turn ever more confrontational.

Fibre2Fashion News Desk (NB)