Central banks have been under pressure to bring record high inflation under control and stabalize the future of global economy. Image: Unsplash/Etienne Martin
- The World Economic Forum’s Annual Meeting 2023 was held at a time of continued economic uncertainty, with warnings of recession amid record-high inflation.
- World leaders gathered in Davos to discuss the need for bold collective action and a mindset of investing in the future.
- Here are key sessions that focused on how 2023 can become fairer, more inclusive and more sustainable.
The economic outlook is bleak. The head of the International Monetary Fund has warned this year will be tougher than last, while 63% of the chief economists surveyed by the World Economic Forum predict 2023 will see a global recession.
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Presented at the Forum’s Annual Meeting in Davos (16-20 January), the latest Chief Economists Outlook finds almost one in five respondents (18%) considers a global recession to be extremely likely this year - more than twice as many as in the previous survey in September 2022. A further 45% consider it to be somewhat likely.
In its Global Economic Prospects report, the World Bank cut its growth forecast for 2023 to 1.7% - 1.3 percentage points below previous forecasts, reflecting "synchronous policy tightening aimed at containing very high inflation, worsening financial conditions, and continued disruptions from Russia’s invasion of Ukraine".
World leaders in Davos discussed the need for bold collective action and a mindset of investing in the future – particularly in the sectors that will lead to higher living standards and sustainable growth.
Global economy during the Annual Meeting 2023
With the risk of a recession in 2023 continuing to loom over major economies, what steps can leaders take to make a potential recession as short and as shallow as possible?
Energy systems have experienced a series of shocks, forcing many governments to step in to protect citizens and companies from skyrocketing prices while scrambling to shore up national energy security. As decisions-makers worldwide strive to craft energy strategies for the year ahead, how can they reconcile energy resilience, affordability and sustainability?
The biggest driver of renewable energy growth today is energy security.”
Join this media briefing with leading economists from around the world to discuss the emerging economic landscape and the decisions that lie ahead for policy-makers in 2023 and beyond.
Flows of capital, goods, services and people have boosted productivity and living standards, tripling the size of the global economy over the past three decades. However, tensions over trade and investment are undermining growth and trust.
As the cost of further disintegration severely outweighs the benefits, how can leaders reshape the current system to develop a new agenda for trade, growth and investment?
If the world were to decouple into two trading blocs, it would cause a 5% decrease in global GDP over the long term.”
Recession in 2023? That depends on where you are in the world
With inflation soaring and real wages falling, the global cost of living crisis is hitting hardest the most vulnerable in societies. Are orthodox responses sufficient or do policy-makers need a new toolkit?
The promise of new technologies does not always translate into economic progress, while tried and tested technologies can be the key to unlocking growth and transformation. How should policy-makers and businesses balance the role of new and old technologies?
Shifting demographics will drive growing demand for eldercare, childcare and wider social infrastructure. What investments, incentives and partnerships are needed to build a well-functioning care economy?
Europe is facing a slow-growth, high-debt and high-inflation economy, even as labour markets remain persistently tight. With limited fiscal and monetary tools available, where can Europe's leaders find the space to deliver growth?
With the current competition of ideologies between reshoring, offshoring and distributed shoring, how can businesses and political leaders successfully navigate the reshuffling of global value chains to enable resiliency, sustainability and inclusive growth?
People are looking for win-win solutions and that is where a totally new paradigm is emerging.”
The reason the world has advanced so much in the last three four decades is because of the efficiency of global supply chains.”
The world has been roiled by global crises and there is little prospect of a let-up, with 80% of experts expecting persistent volatility and further shocks over the next two years. Against this backdrop, how can leaders prepare for the future while ensuring that the impacts of recent crises do not impose a burden on societies and economies?
The engines of global growth are slowing and the number of households and businesses facing economic distress is rising. What does the future of growth look like and what policies are needed to stabilize the global economy?
Be pragmatic, collaborate. Do the right thing — keep the global economy integrated for the benefit of all of us.”
A snapshot of the global economy in 2023
Over the past 12 months, the world has seen the economic fall-out from both the COVID-19 pandemic and the war in Ukraine, which has slowed growth, sent inflation soaring as both food and energy prices rose and forced policymakers into tightening fiscal policy.
The World Bank estimates that we will fail to eradicate poverty by 2030 – and instead, given current trends, there will still be 574 million people (almost 7% of the global population) living on less than $2.15 a day, with most of those in Africa.
Global food production, including staples such as rice and wheat, is unlikely to replenish depleted inventories, at least in the first half of 2023, Reuters reported in December, due to extreme weather events, the war in Ukraine and high energy costs. Food import costs were on course to hit a record $2 trillion in 2022, forcing poor countries to cut consumption.
Higher interest rates are having knock-on effects on emerging markets, with many now struggling to service their debts.
Between 2022 and 2026, it’s estimated emerging and developing countries will have financing needs of $2.5 trillion, which could trigger a debt crisis, according to modelling by the Finance for Development Lab, which is backed by the Bill & Melinda Gates Foundation.
The Coming Debt Crisis report notes that: “All but three African countries with outstanding bonds face yields above 10%. High borrowing costs, coinciding with high financing needs, could in turn lead to exploding dynamics.”
The IMF’s inaugural Global Debt Monitor found global debt continued to rise in 2021, reaching a record $235 trillion. But total public and private debt fell by 10 percentage points to 247% of global gross domestic product (GDP) in 2021 from its peak of 257% in 2020.
Meanwhile, countries are increasingly onshoring and even ‘friendshoring’ supply chains to build resilience, in protectionist measures that threaten global trade.
According to the UN Trade and Development Agency (UNCTAD), global growth “turned negative” during the second half of 2022, although demand for foreign goods “proved resilient”.
Overall, “geopolitical frictions, persisting inflation, and lower global demand are expected to negatively affect global trade during 2023”, said UNCTAD.
The global economy in numbers
The proportion of Chief Economists predicting a global recession in 2023
Percentage of the global population predicted to live on less than $2.15 a day by 2030
The number of US dollars of global debt reached in 2021
How many years it will take to close the Economic Participation and Opportunity gender gap
The World Bank's growth forecast for 2023.
The proportion of Chief Economists expecting weak growth in Europe in 2023.
All the Chief Economists surveyed by the Forum for the Chief Economists Report expected weak or very weak growth for Europe in 2023, due to the ongoing war in Ukraine, food inflation and the energy crisis, while 91% expected weak or very weak growth for the US.
This marks a significant deterioration since the last survey in September when these figures were 86% for Europe and 64% for the US.
However, only 24% of economists expected high inflation in the US, compared with 57% in Europe.
With inflation at a 41-year high in the UK, the Bank of England warned in December that “falling real incomes, increases in mortgage costs and higher unemployment will place significant pressure on household finances” in 2023.
In the US, the minutes to the latest Federal Reserve meeting in December, released on 4 January, showed the US central bank is set to slow the pace of its interest rate hikes, as inflation falls.
The two strongest regions in 2023 according to the Forum's survey of Chief Economists are the Middle East and North Africa (MENA) and South Asia. In South Asia, 85% of respondents expect moderate (70%) or strong (15%) growth, a modest improvement since the September edition.
China’s leaders gathered during 15-16 December to set the economic agenda for 2023, map out more stimulus steps to underpin growth and ease disruptions caused by a sudden end to COVID-19 curbs.
Japan’s economy, the third biggest in the world, shrank unexpectedly in the third quarter (July to September) – for the first time in 12 months – as a weak yen and higher import costs took a toll on household consumption and businesses.
Meanwhile, in December, the World Bank revised India’s GDP forecast for the financial year 2022 to 2023 upward to 6.9% from 6.5% (in October 2022). The World Bank’s Country Director in India, Auguste Tano Kouame, warned India should stay vigilant, but said the economy had been “remarkably resilient to the deteriorating external environment”.
Must-reads about fairer economies and the Forum’s impact
1. Building resilience
Building resilience against current and future crises will be critical for inclusive, sustainable growth. In May 2022, the Forum launched the Resilience Consortium, which brings together ministers, chief executives and heads of international organizations to accelerate collective action across key resilience drivers for the global economy.
The Forum’s President Børge Brende says: “Growth differentials of between 1% and 5% globally can be expected depending on how leaders respond to the many challenges, including climate change, the energy transition, supply chain disruptions, healthcare availability and income, gender and racial inequalities… Sufficient investment and new capabilities are required to build a new ‘resilience muscle’.”
2. Harnessing the power of digital
Some of that growth will come from digital transformation, which can add $100 trillion to the global economy by 2025, while digital solutions can deliver up to 20% of the carbon reduction required to reach net zero by 2050 in the Energy, Mobility and Materials sectors.
3. Supporting cities
Urban populations are expected to grow by more than 2.5 billion people in the next 30 years, according to UN-Habitat. Resilient, sustainable cities can be engines of growth, but they need financing. In October, the Forum and UN-Habitat launched the Global Partnership for Local Investment, to accelerate public-private collaboration and resourcing of urban initiatives that advance the 2030 Sustainable Development and New Urban Agenda.
4. Empowering women
Women’s economic empowerment is “good for business” and helps economies grow, according to UN Women. But the Forum’s annual Global Gender Gap Report finds it will take another 151 years to close the Economic Participation and Opportunity gender gap. Enabling women’s participation in the workforce through childcare provision is essential, along with closing pay gaps, reskilling women and advancing women into leadership roles. The Forum’s Gender Parity Accelerators create global and national public-private collaboration platforms to address current gender gaps and reshape gender parity for the future.
What's the World Economic Forum doing about the gender gap?
5. Hardwiring DEI into the economy
More broadly, the Forum is working to hardwire Diversity, Equity and Inclusion (DEI) into the global economy by mobilizing a global multistakeholder coalition to learn from and integrate momentum from the Forum’s Partnering for Racial Justice in Business, Disability Inclusion (The Valuable 500), and Partnership for LGBTI Equality initiatives.
6. Facilitating trade
The Forum is one of the host organizations of the Global Alliance for Trade Facilitation which delivers business-driven border reforms, leveraging $50 million of donor funding to move goods more quickly and securely with less red tape. The Forum is also focusing on green trade, to support environmental and climate action worldwide, including through new governance frameworks and supply chain incentives. And it’s working to harness the potential for economic growth from digital trade in services, by accelerating e-commerce opportunities, building towards interoperable global data and payment flows and applying new technologies to better manage trade.