The global economy is looking for elements that can guide it in 2023: will there be a recession? What role will China play? Some answers come from last week’s economic data.
What will happen to the global economy in 2023?
There are two themes - and doubts - looming at the beginning of the year: will the recession hit the great powers and will China be able to resume its growth after yet another Covid wave, dragging down world trade?
There are no certain answers yet, but by analyzing what happened in this past week, some conclusions can be drawn.
Economists from Wall Street to the World Bank are increasingly convinced that most of the world will be in recession this year amid sticky inflation and higher interest rates. However, expectations for Europe are improving. And China? Its reopening boosts raw materials, while trade with Russia is showing interesting signals.
What kind of recession will there be in the world?
Global GDP is likely to grow 1.7% this year, about half the pace expected in June, according to the Washington-based lender. It would be the third worst performance in the past three decades or so, following the 2009 and 2020 contractions.
Bloomberg Economics forecasts global growth of 2.4% for 2023. Excluding the crisis years of 2009 and 2020, this is the lowest rate since 1993.
Specifically, the World Bank cut its growth forecast for most countries and regions and warned that fresh adverse shocks could plunge the global economy into a recession. The bank, which also lowered its 2024 growth forecasts, said persistent inflation and higher interest rates were among the main reasons.
After the shocks of 2022, a recession for much of the world this year looks like a sure bet. Indeed, so far Europe’s two largest economies have surprised to the upside as consumers buoyed year-end GDP momentum in the UK and Germany. And Goldman Sachs said it expects a 0.6% growth rate for the euro area in 2023. Previously, they had forecast an economic contraction of 0.1% for the region.
No more recession? Perhaps it is too early to be certain, considering that the old continent is reeling from the energy issue. However, lower natural gas prices and China’s reopening support the more promising projection according to analysts.
The increasingly decisive China factor
During the week, oil prices rallied again. A lot depends on the dragon. Consumption of Chinese Oil is expected to hit a record high this year as the world’s largest importer lifts the Covid shutdowns, bolstering the global demand outlook and boosting prices.
Oil bulls have built much of their outlook on Chinese demand growth, with Goldman Sachs’ Jeffrey Currie saying that crude oil is the “best game to play as China reopens”.
Meanwhile, another piece of data was interesting and can give indications for the future. China’s trade deficit with Russia reached a record $38 billion last year as global energy prices soared following the outbreak of war in Ukraine.
The world’s second-largest economy bought $114.1 billion worth of goods from Russia in 2022, an increase of 44% from a year earlier.
Original article published on Money.it Italy 2023-01-14 16:03:35. Original title: Recessione o Cina: cosa guiderà l’economia globale?
