According to the Centre for Economics and Business Research, there is a global recession coming in 2023. Higher borrowing costs to combat inflation causes a variety of economies to contract.
- As inflation continues to be a threat, high-interest rates can take their toll.
- China is not expected to surpass the US as the largest economy by 2036
According to the annual World Economic League Table, the British consultancy stated that the global economy has now surpassed $100 trillion but will slow down in 2023 as policymakers continue their fight against rising prices.
Kay Daniel Neufeld, CEBR director and head for Forecasting, stated that “it’s likely the world economy will experience recession next year because of the rises of interest rates in response to higher inflation.”
“The fight against inflation is still not won,” the report stated. We expect the central bankers to remain firm in their resolve in 2023, despite the economic cost. Inflation at lower levels will lead to a worse growth outlook over the next few years.
These findings are worse than the International Monetary Fund’s latest forecast. In October, the International Monetary Fund warned that more than one-third of the world’s economy would contract. There is also a 25% chance that global GDP will grow by less than 2 percent in 2023. This is what it calls a global recession.
Even so, the world’s gross domestic product will double by 2037 as developing countries catch up to the more wealthy. As the power balance shifts, East Asia and the Pacific will account for more than a third of global output in 2037 while Europe’s share falls to less than half.
The CEBR uses data taken from the IMF’s World Economic Outlook to create an internal model that forecasts growth, inflation, and exchange rates.
China will not overtake the US in terms of the largest economy until 2036, six years later than anticipated. This is due to China’s zero Covid strategy and slowing trade tensions with the West, which have slowed down its expansion.
CEBR originally anticipated the switch to take place in 2028. However, it increased its expectation to 2030 last year in its league table. The CEBR now believes that the cross-over point won’t happen until 2036. It may even come later if Beijing attempts to control Taiwan or faces trade sanctions.
“The effects of economic warfare between China, the West and Russia would be many times more severe than those we saw after Russia’s attack against Ukraine.” The CEBR stated that there would be a severe world recession and an increase in inflation.
“But the damage to China will be much greater, and this could well torpedo any attempt at leading the global economy.”
It also predicted:
- India will be the third $10 trillion economy in 2035, and the third largest economy worldwide by 2032
Over the next 15 years, the UK will continue to be the sixth-largest economy in the world, with France being the seventh.
- However, Britain’s growth rate is not expected to match that of European peers because of “an absence of growth-oriented policies and a lack of clarity about its role outside the European Union.”
- As fossil fuels play an important role in the transition to renewable energy, emerging economies with natural resources will see a “substantial boost”.
- The $80,000 per capita level of global GDP at which carbon emissions are decoupled from growth is still a far cry. This means that further policy interventions will be required to limit global warming to 1.5 degrees above preindustrial levels.
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