Global GDP forecast to rise 3% in 2023: PIIE

Contrary to previous expectations, the US economy has displayed robust growth this year. However, a predicted rise in interest rates is likely to hamper this momentum. The third quarter of 2023 saw an uptick in economic activity, but a potential government shutdown in the fourth quarter could bring it to a halt. US’ real GDP is projected to decelerate from a growth of 2.2 per cent in 2023 to 1.6 per cent in 2024, while the unemployment rate is expected to edge up from 3.8 per cent to 4.2 per cent by the end of 2024.

The Federal Reserve is expected to hike the policy rate by 0.25 percentage point in December 2023, taking it to a peak between 5.5 and 5.75 per cent. Rates are expected to remain steady until autumn 2024, as per the Fall 2023 Global Economic Prospects Report.

The UK recently entered a mild recession, and the euro area is facing restrictive financial conditions. PIIE expects UK’s real GDP to decline by 0.3 per cent in 2023 and 0.2 per cent in 2024. The euro area is expected to see modest growth, with projections of 0.6 per cent in 2023 and 1 per cent in 2024. China, grappling with weak consumer demand, is expected to grow by 5.1 per cent in 2023 and 4.5 per cent in 2024.

Three primary risk scenarios could lead to recessions in the US and other economies. Stronger-than-expected underlying demand in the US could necessitate further monetary tightening. A European recession and a weakening Chinese economy could trigger a global downturn. A reacceleration of inflation due to disruptions in commodity markets could lead to tighter monetary policies, affecting already weakened economies.

ALCHEMPro News Desk (DP)