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World Economy Faces More Pain In 2023 After A Gloomy Year


World economy faces more pain in 2023 after a dismal year

Many countries are grappling with a cost-of-living crisis due to wages not keeping up with inflation

Paris:

This is said to be the return year of the world economy after the Covid pandemic.

Instead, 2022 is marked by a new war, record inflation and climate-related disasters. It was a “multi-crisis” year, a term popularized by historian Adam Tooze.

Get ready for more gloom in 2023.

“The number of crises has increased since the turn of the century,” said Roel Beetsma, a professor of macroeconomics at the University of Amsterdam.

“Since the Second World War, we have never witnessed such a complicated situation,” he told AFP.

After the economic crisis caused by Covid-19 in 2020, consumer prices will start to rise in 2021 as countries come out of lockdowns or other restrictions.

Central banks insist that high inflation will only be temporary as economies return to normal. However, Russia’s invasion of Ukraine in late February sent food and energy prices skyrocketing.

Many countries are currently grappling with a cost-of-living crisis as wages fail to keep up with inflation, forcing households to make tough spending choices.

“Everything is getting more expensive, from ice cream to wine and electricity,” says Nicole Eisermann from her stall at the Frankfurt Christmas market.

Central banks have caught up. They began raising rates this year in an effort to tame hyperinflation, which risks pushing countries into a deep recession, as higher borrowing costs mean slower economic activity.

Inflation has finally begun to slow in the United States and the euro area.

Spend carefully

Consumer prices in the Group of 20 developed and emerging countries are expected to hit 8% in the fourth quarter before falling to 5.5% next year, according to the Organization for Economic Cooperation and Development.

The OECD encourages governments to provide aid to bail out households.

In the 27-nation European Union, 674 billion euros ($704 billion) has been spent so far to protect consumers from high energy prices, according to the Bruegel consultancy.

Germany, Europe’s largest economy and most dependent on Russian energy supplies, accounts for 264 billion euros of that total.

According to a survey by consulting firm EY, one in two Germans say they currently only spend on essentials.

“I’m very careful but I have a lot of children and grandchildren,” said Guenther Blum, a shopper at the Frankfurt Christmas market.

Rising interest rates also hurt consumers and businesses, although US Federal Reserve Chairman Jerome Powell signaled last week that the pace of rate hikes could ease “as soon as” December. .

However, he warned that policy would likely have to be kept tight for a while to restore price stability.

For her part, European Central Bank President Christine Lagarde sent a clear signal that the ECB will maintain its tightening policy, saying that eurozone inflation has yet to peak.

Economists expect Germany and another major eurozone economy, Italy, to fall into recession. Britain’s economy has shrunk. Ratings agency S&P Global forecasts stagnation for the euro area in 2023.

But the International Monetary Fund still expects the world economy to expand in 2023, with 2.7% growth. The OECD is forecasting 2.2 percent growth.

Meanwhile, the coronavirus pandemic remains a proxy for the global economy.

China’s Covid-free policy has stunted growth in the world’s second-largest economy, but authorities have begun easing restrictions following nationwide protests.

climate costs

But for Beetsma, the biggest crisis is climate change, which is “playing in slow motion”.

According to reinsurance giant Swiss Re, natural and man-made disasters have caused $268 billion in economic losses through 2022. Hurricane Ian alone caused an estimated insured loss of around $268 billion. 50-65 billion dollars.

Floods in Pakistan have caused $30 billion in damage and economic losses this year.

Governments agreed at the United Nations climate talks (COP27) in Egypt in November to set up a fund to offset the losses suffered by vulnerable developing countries. destroyed by disaster.

But the COP27 summit ended without new commitments to phase out fossil fuels, despite the need to cut greenhouse gas emissions and slow global warming.

“It’s not an acute crisis but a very long-term crisis,” Beetsma said. “If we don’t do enough this will hit us on an unprecedented scale.”

(This story has not been edited by NDTV staff and was automatically generated from an aggregated feed.)

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