According to researchers at the Center for Economics and Business Research, the world economy will fall into a recession in 2023. As central banks across the world are increasing interest rates in order to bring down high inflation, domestic economies tend to contract.
World Economic League Table published by the economic and business consultancy states that the world economy will stall in 2023, despite crossing 100 trillion dollars in 2022 for the first time. The report also states that central banks have not won the battle against high inflation rates. The banks are expected to continue hiking interest rates in 2023 even as the economic costs will be huge.
Center for Economics and Business Research based in London was founded by Douglas McWilliams in 1992.
Kay Daniel Neufeld, director and head of Forecasting at CEBR, stated that the world economy will face a recession next year as a result of the rises in interest rates in response to higher inflation. Various other analytical think tanks have also projected that central banks across the world will continue hiking interest rates till December 2023.
Central banks usually follow the monetary policy pattern of US Federal Reserves while deciding on key interest rate decisions. Federal Reserve of the United States has so far hiked the key interest rate seven times this year in various quantities. While announcing the seventh interest rate hike, central bank officials hinted that there would be additional rate hikes in 2023 as well.
Even though inflation rates are showing signs of deceleration in the economy, it is floating high above the target of 2 per cent set by the Federal Reserve. The latest consumer price index data from the United States shows that annual inflation has slowed from 7.7 per cent in October to 7.1 per cent in November.
CEBR report also states that China will not overtake the United States as the world’s largest economy until 2036, as its strict zero COVID-19 policy and trade war with the United States has slowed down the expansion of its domestic economy. The decision of multinational companies to move their production facilities out of China also has had serious impacts on economic growth.
The ever-growing economic and political tensions between China and the United States will reportedly have long-lasting impacts on global economic growth over the years.
Despite the highly challenging global economic conditions, India will become the third $10 trillion economy in 2035 and the world’s third-largest by 2032. India has so far been successful in controlling inflation rates without compromising the growth prospects of the domestic economy.