Analyst Views on the Global Economy
- Global GDP growth remains fragile following the impact of the war in Ukraine. Both advanced and developing economies are being affected by the impact of the war. In addition, China’s zero COVID-19 policy, if sustained, will slow the country’s growth and therefore have ripple effect on consumer demand and exports, especially in view of China’s contribution to global output and trade.
- With inflation already causing a cost-of-living crisis in several countries, a recession could trigger protests and unrests among poor and low-income earners. Central Banks will therefore need to tread cautiously in implementing a tight monetary policy stance to minimize the likelihood of a recession.
- The performance of the global economy will be hinged on the war in Ukraine and its continued impact on global commodity prices and trade. Oil producers may continue to benefit from high commodity prices in 2023, while oil importers will bear much of the cost of energy inflation, which could further slow economic growth and recovery.
- Inflation has become a major source of concern for many countries. The war in Ukraine triggered a sharp increase in crude oil and gas prices, which led to high food prices and energy costs across countries. In the United Kingdom, inflation rate rose to 40-year high of 10.1% in July 2022. In Germany, inflation rate rose to 10% in September 2022, reaching an all- time high since German reunification.
- While government’s across countries are implementing fiscal support and subsidies to ameliorate the situation for businesses and citizens, these measures do not appear sufficient in taming inflation. Monetary authorities have also raised interest rates to tackle rising prices, and this raises the possibility of constraining aggregate demand growth, and therefore could trigger a recession in some countries.