UNITED NATIONS (TBEN) — The United Nations forecast on Wednesday that global economic growth will fall significantly this year to 1.9% due to the food and energy crisis caused by the war in Ukraine, the continued impact of the COVID-19 pandemic, continued high inflation and the climate crisis.
The UN Department for Economic and Social Affairs outlined a bleak and uncertain economic outlook, saying the current global economic slowdown is “cutting across developed and developing countries alike, with many at risk of a recession in 2023”.
“A broad and severe slowdown in the global economy is looming amid high inflation, aggressive monetary tightening and heightened uncertainties,” UN Secretary-General Antonio Guterres said in a foreword to the 178-page report.
According to the report, the economic growth forecast of 1.9% for this year – up from an estimated 3% in 2022 – is one of the lowest growth rates in recent decades. But it expects a moderate recovery to 2.7% in 2024 as inflation gradually eases and economic headwinds begin to ease.
In its annual report earlier this month, the World Bank, which lends money to poorer countries for development projects, cut its growth forecast nearly in half from its previous forecast of 3% to just 1.7%.
The International Monetary Fund, which provides loans to needy countries, predicted in October that global growth would slow from 6% in 2021 to 3.2% in 2022 and 2.7% in 2023. IMF Director Kristalina Georgieva said last week the World Economic Forum in Davos that 2023 will be a tough year, but stuck with the projection, saying “we don’t expect a global recession.”
This year, according to the UN report, “growth momentum has weakened in the United States, the European Union and other developed economies, negatively impacting the rest of the global economy.”
In the United States, GDP is expected to grow by just 0.4% in 2023, following an estimated 1.8% growth in 2022, the UN said. And many European countries are expected to experience a “mild recession” as Ukraine’s war enters its second year on Feb. 14, high energy costs, inflation and tighter financial conditions weigh on household consumption and investment.
According to the UN, economies in the 27-country European Union are expected to grow by just 0.2% in 2023, up from an estimated 3.3% in 2022. And in the UK, which left the EU three years ago, GDP is expected to shrink by 0.8% in 2023, continuing a recession that began in the second half of 2022, it said.
With the Chinese government abandoning its zero-COVID policy late last year and easing monetary and fiscal policies, the UN predicts that the economy, which grew at just 3% in 2022, will accelerate to 4.8% this year.
“But the reopening of the economy is expected to be bumpy,” the UN said. “Growth is likely to remain well below the pre-pandemic rate of 6-6.5%.”
According to the UN report, Japan’s economy is expected to be among the best-performing of developed countries this year, with GDP growth forecast at 1.5%, slightly lower than last year’s estimated growth of 1.6% .
Across East Asia, the UN said the economic recovery remains fragile, though GDP growth is expected to reach 4.4% in 2023, up from 3.2% last year, and stronger than other regions.
In South Asia, the UN forecast average GDP growth will slow from 5.6% last year to 4.8% this year due to high food and energy prices, “monetary tightening and fiscal vulnerabilities”.
But growth in India, which is expected to overtake China as the world’s most populous nation this year, is expected to remain strong at 5.8%, slightly down from an estimated 6.4% in 2022, “as higher interest rates and weigh a global slowdown on investment and exports,” the UN report said.
In western Asia, oil-producing countries are benefiting from high prices and rising production, as well as a resurgence in tourism, the UN said. But non-oil producing economies remain weak “given tightening access to international finance and severe fiscal constraints”, and average growth in the region is expected to slow from an estimated 6.4% in 2022 to 3.5% this year.
The UN said Africa has been hit “by multiple shocks, including weaker demand from key trading partners (especially China and Europe), a sharp rise in energy and food prices, rapidly rising borrowing costs and adverse weather conditions.”
One of the consequences, it said, is mounting debt that has forced a growing number of African governments to seek bilateral and multilateral aid.
The UN predicted that economic growth in Africa would slow from an estimated 4.1% in 2022 to 3.8% this year.
In Latin America and the Caribbean, the UN said the outlook “remains challenging”, citing labor market prospects, stubbornly high inflation and other issues. It predicted regional growth will slow to just 1.4% in 2023, from an estimated growth of 3.8% in 2022.
“The region’s largest economies – Argentina, Brazil and Mexico – are expected to grow at a very slow pace due to tightening financial conditions, weakening exports and domestic vulnerabilities,” the UN said.
For the world’s least developed countries, the UN said growth this year is projected at 4.4%, about the same as last year but significantly below the UN target of 7% by 2030.