Global economic growth near lowest in recent decades, says UN report

UN Secretary General Antonio Guterres warns of 'severe slowdown'

Inflation has run rampant and global demand has softened, as natural disasters, Covid-19 waves and supply-chain issues have hammered countries. EPA

The UN on Wednesday lowered its projection for global economic growth to 1.9 per cent this year, compared to 3 per cent in 2022, with economic powerhouses Europe, China and the US all expected to experience weakened activity.

The World Economic Situation and Prospects 2023 report said the forecast marks one of the lowest growth rates in recent decades.

Economies around the world have come under pressure from the war in Ukraine and its impact on energy and food prices. Inflation has run rampant and global demand has softened, as natural disasters, Covid-19 waves and supply-chain issues have hammered countries.

UN Secretary General Antonio Guterres warned that a “severe slowdown” of the global economy looms large amid high inflation, aggressive monetary tightening and “heightened uncertainties”.

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Many economies “are at risk of falling into recession, having barely recovered from the shock of the pandemic”, he said.

The World Bank this month projected global growth would decline to 1.7 per cent in 2023, from the 3 per cent forecast six months ago.

Mr Guterres urged governments around the world to strengthen fiscal support to protect vulnerable groups and increase investment in health and education to “build human capital and social cohesion for the future”.

Pointing to high inflation — which averaged about 9 per cent globally in 2022 — and aggressive monetary tightening, the 178-page report said rapid interest rate rises, particularly by the US Federal Reserve, “have had global spillover effects, triggering capital outflows and currency depreciations in developing countries, increasing balance of payment pressures and exacerbating debt sustainability risks”.

The US economy is expected to grow by only 0.4 per cent this year after an estimated growth of 1.8 per cent in 2022.

Meanwhile, the economic outlook for the EU in 2023 has “sharply deteriorated”.

The energy crisis is likely to push the European economy into a “mild” recession this winter and gross domestic product will grow by a mere 0.2 per cent, down from 3.3 per cent in 2022, the report said.

Britain’s economic prospects are “particularly bleak” as the nation faces a surge in energy bills, fiscal pressures and post-Brexit trade difficulties. Its GDP is forecasted to contract by 0.8 per cent this year.

Growth in China, the world's second-largest economy, is projected to “moderately” improve in 2023 after a weaker-than-expected performance in 2022. The economy is forecast to pick up from 3 per cent to 4.8 per cent due to the easing of Covid-related restrictions.

The UN expects the reopening of China’s economy to be “bumpy” and it is likely to “remain below the pre-crisis” trend.

The outlook is grimmer for other countries.

Pakistan’s economy is expected to expand by only 2.5 per cent this year as devastating floods in 2022 rendered more than two million people homeless, wiped out crops and destroyed or damaged vital infrastructure, including thousands of kilometres of roads and railway.

Shelves sit devoid of products in a Target store in Sheridan, Colorado. AP

On a positive note, the report said major crude oil producers in the region, which include Iraq, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, have witnessed rapid economic expansion.

Crude oil production grew on average by an estimated 10 per cent in 2022.

The sharp growth came despite global economic deceleration amid inflation that hit a 40-year high in the US and Europe.

“This stemmed from elevated external demand spurred by the co-ordinated crude oil production increase under the Opec+ agreement,” said the report.

UN data also pointed out that unemployment rates last year fell to pre-pandemic levels in Israel, Saudi Arabia and Turkey.

The unemployment rate of Saudi citizens declined to 9.7 per cent in the second quarter of 2022, the lowest level in 20 years, driven by an increase in women working.

Some countries are still facing a slow employment recovery.

In Jordan, the unemployment rate stood at 22.6 per cent in the second quarter of 2022, above the 19.3 per cent recorded in the first quarter of 2020.

Unemployment rates in Lebanon stood at 29.6 per cent, above the 11.4 per cent level recorded before the financial crisis that erupted in 2019.

Updated: January 25, 2023, 5:45 PM