The global economy is heading for a recession in 2023, says the researcher

The Center for Economics and Business Research warned that the world faces a recession in 2023. Photo: iStock

  • The Center for Economics and Business Research warned that the world faces a recession in 2023.
  • The global economy surpassed $100 trillion for the first time in 2022 but will stall in 2023 as policymakers continue their fight against rising prices.
  • That CEBR has warned that more than a third of the world economy will shrink and that there is a 25% chance that global GDP will grow by less than 2% in 2023.
  • For more financial news go to News24 Business front page.

According to the Center for Economics and Business Research (CEBR), the world faces a recession in 2023, with higher borrowing costs to fight inflation causing a number of economies to shrink.

The global economy surpassed $100 trillion for the first time in 2022 but will falter in 2023 if policymakers continue their fight against soaring prices, the British consultancy said in its annual World Economic League Table.

“It is likely that the global economy will face a recession next year due to rate hikes in response to higher inflation,” said Kay Daniel Neufeld, director and head of forecasting at CEBR.

The report added: “The battle against inflation is not yet won. We expect central bankers to remain on course in 2023 despite the economic costs. The cost of bringing inflation down to more comfortable levels is worse for some years to come.”

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The results are more pessimistic than the International Monetary Fund’s most recent forecast. That institution warned in October that more than a third of the world economy will contract and that there is a 25% chance that global GDP will grow less than 2% in 2023, which it defines as a global recession.

Even so, global gross domestic product will have doubled by 2037 as emerging economies catch up with richer ones. The shift in power relations will mean that by 2037 the East Asia and Pacific region will account for more than a third of global production, while Europe’s share will shrink to less than a fifth.

The CEBR gets its baseline data from the IMF’s World Economic Outlook and uses an internal model to forecast growth, inflation and exchange rates.

China won’t overtake the US as the world’s largest economy until 2036 at the earliest – six years later than expected. That reflects China’s zero-Covid policy and rising trade tensions with the slow-moving West, which have slowed its expansion.

CEBR originally expected the move to be in 2028, which it pushed back to 2030 in last year’s rankings. It now believes the transition point will not happen until 2036, and possibly even later, when Beijing seeks to take control of Taiwan and faces retaliatory trade sanctions.

“The consequences of an economic war between China and the West would be many times more serious than what we saw after Russia’s attack on Ukraine. There would almost certainly be a fairly severe global recession and a resurgence of inflation,” CEBR said.

“But the damage to China would be many times greater and could thwart any attempt to lead the global economy.”

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It was also predicted that:

  • India will be the third $10 trillion economy in the world by 2035 and third largest by 2032
  • The UK will remain the world’s sixth largest economy and France seventh for the next 15 years, but the UK will no longer grow faster than its European peers due to the ‘lack of pro-growth policies and a clear vision of its role outside the European Union .”
  • Emerging economies with natural resources will get a “substantial boost” as fossil fuels play a major role in the shift to renewable energy
  • The global economy is a long way from the $80,000 per capita GDP level at which carbon emissions decouple from growth, meaning more policy intervention is needed to reach the goal of reducing global warming to just 1.5 degrees above pre-industrial levels.

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