Macroeconomic conditions

Global economic growth slowed again in 2023. The International Monetary Fund (IMF), in its January outlook (IMF, January 2024), forecasts that global economic output fell from 3.5 percent in 2022 to 3.1 percent in 2023. The global economy achieved only a weak recovery because of factors such as the strain of the ongoing war in Ukraine, the fallout from the coronavirus pandemic, and the rise in the cost of living. Despite these negative factors, the IMF has determined that real gross domestic product (GDP) was higher than the figure that it had assumed in its October forecast (IMF, October 2023) thanks to stronger-than-expected economic growth in the second half of 2023 in the US and in several large emerging markets and developing economies. Another reason was fiscal support in China. A faster-than-anticipated reduction in inflation also had a positive impact. Rising economic momentum was not felt across the board, however. The eurozone’s growth was particularly sluggish owing to subdued consumer sentiment, the lingering effects of high energy prices, and the phase of weakness in interest-rate-sensitive manufacturing and in general business investment.

The central banks’ sharp interest-rate hikes aimed at restoring price stability resulted in less favorable financing conditions, albeit with significant regional differences. The IMF estimates that the inflation rate in developed countries fell from 7.3 percent in 2022 to 4.6 percent in 2023. The effect was much less pronounced in the emerging markets and developing economies, where inflation was down from 9.8 percent in 2022 to 8.4 percent in the reporting year. Tight monetary policy also had an impact on growth, one of the reasons being companies’ reluctance to invest due to the deterioration in lending conditions.

The developed countries increased their economic output by just 1.6 percent in 2023 (2022: 2.6 percent). The slowdown was particularly prominent in the eurozone, where growth fell from 3.4 percent to 0.5 percent. The US improved on the moderate growth rate achieved in 2022 (1.9 percent) with an increase of 2.5 percent in 2023.

The emerging markets and developing economies recorded growth of 4.1 percent, which was unchanged on their growth rate for 2022 of 4.1 percent. China saw its growth increase from 3.0 percent in 2022, when the effects of the coronavirus pandemic were still being felt, to 5.2 percent in 2023.

The volume of global trade, which had swelled by 5.2 percent in 2022, rose by only 0.4 percent and thus remained at virtually the same level as in the prior year.

Gross domestic product 2023 – real year-on-year change

Gross domestic product 2023 – real year-on-year change (bar chart)
Source: International Monetary Fund (as at January 31, 2024).