The global economic growth is poised to gain momentum in 2023 due to easing inflation pressures in food and energy sectors, the gradual revival of European nations, strong growth potential in the Asia-Pacific (APAC) region, and North America’s resilient labor market. As economies move through diverse business cycle stages, regional disparities may emerge. Nevertheless, APAC nations are set to drive nearly 70% of the global growth, whereas Western peers could encounter significant economic deceleration, reveals GlobalData, a leading data and analytics company.
Against this backdrop, GlobalData has revised its 2023 economic growth projection for the global economy by 0.11 percentage points (pp) to 2.1% in June 2023, compared to its previous projections in March 2023.
GlobalData’s latest report, “Global Macroeconomic Outlook – Q3 2023 Update,” reveals that all regions are expected to experience a slowdown in economic growth in 2023, except for the APAC region. However, in June 2023, growth projections were revised upward for APAC to 3.8% (0.10 pp higher than March 2023), the Americas to 1.2% (0.11 pp increase), and Europe to 0.6% (0.22 pp higher).
On the other side, the Middle East and Africa (MEA) region’s growth projection was downwardly revised to 2.8% (a 0.37 pp decrease) due to declining oil prices and lower production. Less developed African nations also face challenges from high food prices, complicating their economic recovery.
The global inflation rate is estimated to decrease to 5.3% in 2023 from 8.7% in 2022, but it is projected to remain above the target set by major economies’ central banks. GlobalData estimates inflation rates to ease across all regions—APAC (6.6% in 2023 vs 7.6% in 2022), the Americas (9.9% vs 10.4%), Europe (7% vs 11%), and the Middle East & Africa (16% vs 19%).
Ramnivas Mundada, Director of Companies and Economic Research at GlobalData, comments, “In the first half of 2023, the EU27, G7, and the US observed a clear trend of alleviating inflationary pressure, driven by a decline in energy and food prices. However, core inflation (which excludes the influence of volatile food and energy costs) exhibits a rising trend and reveals growing uncertainty in achieving the target inflation rate set by central banks. A key factor contributing to this uncertainty is the persistent surge in wages. As wages continue to rise, companies are facing higher labor costs, posing challenges in meeting the desired inflation rate.”
In H1 2023, EU27, G7, and the US witnessed contrasting trends in business and consumer sentiment. Business confidence remained restrained, impacted by costly financing, and decreased external demand. On the other hand, consumers felt more optimistic as inflationary pressures eased, contributing to an improvement in the consumer confidence index.
GlobalData’s analysis, utilizing data from the Federal Reserve Bank of New York, revealed that the Global Supply Chain Pressure Index reached a historic low in May 2023. This indicated a substantial reduction in bottlenecks contributing to inflation. The index remained in negative territory from February 2023 to June 2023.
Global trade faces challenges from geopolitical tensions, weak demand, and tight monetary policies. Nonetheless, there is hope for a gradual recovery, supported by improved supply-side conditions, which could enhance trade prospects in the following quarters. GlobalData analysis, using World Trade Organization data, shows a positive 0.7pp revision in 2023 global trade volume growth to 1.7% in April 2023, from October 2022 forecast.
Meanwhile, in June 2023, the resolution of the US debt-ceiling debate brought relief to the US and global economy, ensuring stability for the next two years and averting disruptions in financial markets.
GlobalData projects APAC to drive nearly 70% of the global growth in 2023, with India and China contributing 50%. Other countries including Vietnam, Bangladesh, Indonesia, and the Philippines are projected to register robust growth of above 4.5% in 2023. Nonetheless, China’s recent economic data have defied expectations for a sustained recovery in H2 2023. Stagnant consumer prices and a continuous decline in the producer price index indicate sluggish demand conditions.
Mundada concludes: “Despite an optimistic outlook, persistent high core inflation, geopolitical tensions between the US and China, expected slowdown of the Chinese economy in H2 2023, and uncertainties from the conflict in Ukraine remain areas of concern. Proactively managing these risks is essential to sustain the positive economic trajectory.”
