Global economic uncertainty seems to be the new norm

The global economic slowdown trend could continue in 2023, even leading to a mild recession.

Particularly, the United States is at an increased risk of recession because of a delayed effect of the Federal Reserve's aggressive interest rate hikes and other tightening monetary policies, increased downward pressures on demand in its labor market, and an insufficient consumption momentum. The continued impact of the energy crisis, declining external demand, and tighter monetary policies could lead even the European economy to stagnate in 2023.

In Asia, Japan's economy will recover slowly, but its aging population will make it difficult for it to grow significantly, while the Fed's monetary policy and global economic downturn will put it under greater pressure. India's economy is expected to maintain a high growth rate in 2023, aided by its energy transition, offshore outsourcing, and expanded manufacturing investment. China's economy will recover growth due to its optimized pandemic prevention and control policies, and strengthened driving effects of consumer demand on economic growth, but the downturn of the real estate sector, an aging population, and the lack of external demand will to some extent affect its growth.

Global inflation could ease in 2023, but will still remain above the low levels before the global financial crisis. According to the International Monetary Fund, global inflation peaked at 8.8 percent in late 2022 and it is expected to decline to 6.5 percent in 2023 and 4.1 percent in 2024, still much higher than the 2 percent targeted by central banks.

The world's major economies adopted a tightening macroeconomic policy in 2022, which has had a certain impact on global economic recovery. In 2023, some countries may stop such policies fearing a recession. There are still risks of volatility in commodity prices, which are not expected to decline significantly in 2023.

Overall, the global economy still faces challenges, because of high inflation, monetary policy tightening, and the adverse effects of the Russia-Ukraine crisis. However, global technological innovation and industrial transformation catalyzed by the digital economy and green economy are enhancing the momentum of global growth, while the continuous development of digital technology and its deep integration with the real economy are accelerating industrial digital transformation.

Increased international policy coordination and cooperation will also provide a favorable business environment for global enterprises and raise expectations for world economic development.