The global economy is emerging from pessimism
International Business News – The pessimistic discourse on the global economy is waning. On January 31, Beijing time, the International Monetary Fund (IMF) raised its economic growth forecast for 2023 to 2.9%, up 0.2 percentage points from three months ago. Expectations are high for a slowdown in higher prices and a normalization of China’s economy. The risk of renewed inflationary pressures remains due to the intensification of the war and the recovery of demand in China.
The IMF believes that the downside risks to the World Economic Outlook are high. For example, “intensification of war” is one of the risk factors. In China, the level of immunization is low outside the major metropolitan areas (NCCV) and the capacity of hospitals is insufficient.
While citing these concerns, the Outlook states that growth rates are expected to “bottom out”, with an estimate of 3.8 percent for 2023 made in January 2022. It was revised downward three times in a row after the Russian-Ukrainian conflict the following month, to 2.7% in October 2022. This time it was revised upward for the first time under the Ukraine crisis.
The U.S. is 1.4 percent, an increase of 0.4 percentage points. The eurozone and Japan were revised upward by 0.2 percentage points to 0.7% and 1.8%, respectively. China, which has shifted its prevention policy, was revised up by 0.8 percentage points and is expected to reach 5.2 percent.
IMF Chief Economist Pierre-Olivier Gourinchas told a press conference that a 1 percentage point increase in China’s economic growth rate would have a 0.3 percentage point pull effect on the rest of the world, stressing that “this is huge”. For the world economy, he said, “it could be a turning point in the decline of inflation”.
Private forecasts are also optimistic. The Nihon Keizai Shimbun asked five economists and predicted an average world economic growth rate of 2.3 percent in 2023.
The business boom is changing, and on January 31, China’s National Bureau of Statistics released data showing that the manufacturing purchasing managers’ index (PMI) reached 50.1 in January, three months above the 50-year mark.
There are other concerns as China recovers smoothly. That is the possibility of re-intensifying global inflationary pressures.
The 3-month copper futures on the London Metal Exchange (LME) are currently up 10 percent from the end of 2022. Some believe that China, the largest consumer of copper, will increase demand. The International Energy Agency (IEA) forecasts that global oil demand will hit a record high in 2023. There is a risk of the supply chain falling into disruption again due to the U.S.-China confrontation around cutting-edge semiconductors, etc.
There are also concerns about high prices in the U.S. and Europe due to the oversupply of labor and other reasons. If the monetary tightening continues for a long time, it will become a heavy burden on the economy, and the economic growth rate in the Eurozone fell to about 0% in October-December released on January 31. In addition, the problem of over-indebtedness in emerging market countries with fragile economic fundamentals remains unresolved.
The worst prospect of major countries and regions falling into a severe recession together is now far away. However, the global economy is still facing the fire of decoupling, and the continued perilous situation has not changed.