Worsening World Economic Outlook through 2023

USA: The outlook for the global economy has worsened in 2023, according to several recent analyses, as the ongoing conflict in Ukraine continues to restrict trade, particularly in Europe, and the market sees China as a thoroughly disruptive economy. Looking forward to fully reopening after months. COVID-19 Lockdown.

Fears of a recession grew in the United States as indicators of a tight labor market and a slowdown in business activity emerged. Inflation increased globally, and business activity decreased overall, particularly in the Eurozone and the UK.

In a report released on Thursday, the Institute of International Finance forecast that the world economy would grow just 1.2% in 2023, the same pace as in 2009, when the world was just beginning to recover from the financial crisis.

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The gloomy forecast is shared by the Organization for Economic Co-operation and Development (OECD). Alvaro Santos Pereira, the organisation's interim chief economist, said in a report released this week: "We are currently facing a very difficult economic outlook.

Our primary scenario does not include a global economic recession, but rather a significant slowdown in global economic growth in 2023, as well as persistently high inflation in many countries despite recent declines.

US Most analyzes of the current and future state of the economy in the U.S. have focused heavily on inflation and the Federal Reserve's efforts to combat it.

With prices starting to rise significantly in mid-2021, the U.S. Currently experiencing its highest level of inflation in 40 years. Annual rates are set to reach more than 6% by early 2022 and peaked at 6.6% in October, despite some volatility.

The Federal Open Market Committee (FOMC), which controls central bank base interest rates, began raising them dramatically in March. As a result, the benchmark rate has now moved from between 0.0% and 0.25% to between 3.75% and 4.0%.

The Fed's actions are aimed at changing incentives for consumers. The central bank is attempting to reduce demand and, consequently, slow the rate of price rise by making interest rates on savings more attractive and by reducing borrowing rates.

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The Federal Reserve considers a healthy inflation rate of 2% per year as its long-term objective.

The Fed aims to reduce inflation without sending the economy into a catastrophic recession. And even though some economic indicators suggest that measures to slow demand may be taking effect, the potential for a recession still exists.

Evidence made public this week shows companies responded to a slump in consumer demand by slowing business activity in the United States for the fifth month in a row.

Despite the fact that the economy has continued to create jobs recently, more people are applying for unemployment benefits, which could indicate a possible softening of the labor market.

FOMC meeting minutes from the first meeting of November were made public this week by the Federal Reserve. The minutes showed that staff economists at the central bank had a negative outlook for the US economy in the coming year.

They concluded that the probability of the economy entering a recession at some point in the coming year is "about as likely as the baseline."

According to a "substantial majority" of the committee's voting members, the time has come to slow the rate of interest rate increases. This suggests that the FOMC will raise its current rate from 0.75% to perhaps 0.5% when it meets in December.

Governments around the world are facing a challenging task: helping their citizens during a period of sharp increases in prices, especially for basic goods such as food and fuel, which have been severely affected by the conflict in Ukraine. Has happened.

The International Monetary Fund (IMF) highlighted the challenging Juggling Act in a report released this week, noting that "many are still struggling,

Governments should continue to prioritize helping the most vulnerable to cope with rising food and energy bills and cover other costs – but governments should also avoid increasing aggregate demand in a way that risks dialing down inflation. Is. Developing economies.

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The Institute of International Finance (IIF) predicts that overall growth will be modest but net positive in 2023, but some sectors will experience declines. Foremost among them is Europe, where the IIF projects a decline of 2.0% in total GDP.

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