Page 29 - CII Artha Magazine

Global Trends

T he global economy The rise in central bank policy Its labor market has remained year (January-July), China’s Global commodity prices, Finance Minister has forecast
continues to be mired in
especially food and crude oil,
inflation to fall to about 5.0
exports fell by 5.0 per cent on
rates to fight inflation
tight since March 2022.
uncertainty as disruptive continues to weigh on Employment levels in the an annual basis, while imports which were on a downward per cent by the end of
events such as the Covid-19 economic activity. As a result, country rose by 222 thousand dropped by 7.6 per cent trajectory, have started to inch the year.
pandemic followed by the the International Monetary to 161.5 million in August, with during the same period. higher since July 2023. The rise
Russia-Ukraine war are Fund (IMF), in its latest World major job gains occurring in in food prices, which could be On the other hand, China
continuing to create Economic Outlook projects healthcare, social assistance, Amongst other major a seasonality issue, may keep reported a 0.3 per cent drop
turbulence in the global the global economy to slow financial activities and the economies, Eurozone, is still food inflation elevated in the in CPI inflation in July, the first
economy. Not surprisingly, from 3.5 per cent in 2022 to wholesale trade sector. The reeling from last year’s sharp near term. decline since early 2021. The
economies across the world an estimated 3.0 per cent in labor force participation rate spike in gas prices caused by fall in prices could be attribut-
are slowing, and growth 2023 and 2024. While the
trajectories are diverging forecast for 2023 is modestly inched up to 62.8 per cent, the the conflict between Russia Among select countries, the ed to the weakening of the
across regions amidst higher (~ 20 basis points) highest since February 2020. and Ukraine. Its growth rate British households, which economic momentum in the
moderating but above target than that projected in April decelerated to 0.6 per cent in were facing inflation in country due to lackluster
inflation, tight financial 2023, it remains weak by China’s growth of 6.3 per cent the second quarter of 2023. double-digits due to high food domestic demand. The CPI
conditions, simmering historical standards. This is in Q2 as compared to 4.5 per The moderation in growth of and energy bills until Q1 2023, deflation may put pressure on
geopolitical conflicts, the weakest growth profile cent in Q1 came on the back the Eurozone economies was have started seeing some level the government to consider
geoeconomic fragmentation, since 2001 except for the of a low base. Going forward, largely due to a large drop in of softening, thereby releasing additional fiscal stimulus to
along with extreme weather global financial crisis and the with a sharp deterioration in real incomes and surging pressure on household mitigate the challenge.
conditions. acute phase of the COVID-19 its economic activity and interest rates. budgets. Further, the British
pandemic. credit flows, the Chinese
economy is now the biggest UK, on the other hand, Trajectory of Global Inflation in Key Economies (y-o-y%)
to decline to 2.1 per cent in oil stood at $94.9 per barrel threat to global demand. A reported a growth of 0.4 per 12.0
Global Growth Trajectory (y-o-y%) 2023, a full percentage point (as on 22nd September 2023). slowdown in the US and cent in the second quarter of 10.0
less than in 2022, before The rise also comes at a time major economies have 2023, with household 8.0
2023
2024
Country/Region 2022 (Forecast) (Forecast) recovering marginally to 2.4 when Russia has announced a dragged down Chinese consumption, along with 6.0 6.8 5.3
exports and domestic demand
manufacturing output driving
production cut by 50,000
per cent in 2024 as inflation
4.0
Advanced Economies 2.7 1.5 1.4 pressures persist and tight barrel per day, starting August. too remains lackluster thereby growth during the quarter. 2.0 3.2 3.3
monetary policy is expected Saudi Arabia, too, is likely to threatening its recovery Further, as per the forecasts by
0.0
United States 2.1 1.8 1.0 to weigh substantially on extend its voluntary monthly prospects. China’s exports fell the Bank of England, UK will -2.0 -0.3
Euro Area 3.5 0.9 1.5 economic activity. production cut of one million by 14.5 per cent in July, on an be avoiding a recession this Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2022 Q4 2022 Q1 2023 Q2 2023
barrels per day, in its next annual basis, while imports year and is likely to see a Q3 2023 (July) Q3 2023 (July) Q3 2023 (July) Q3 2023 (July) Q3 2023 (July)
Japan 1.0 1.4 1.0 Some of the high frequency meeting in October. Such dropped by 12.4 per cent in boost in business investment
global indicators also point in output cuts, together with US dollar terms. Further, for in the coming quarters. US UK Eurozone Japan China
Emerging and 4.0 4.0 4.1 the direction of a slowdown stimulus measures announced
Developing in August on account of a in China to revive the the first seven months of the Source: National Sources
Economies
decline in the services sector economy and hopes of an
Brazil 2.9 2.1 1.2 and a contraction in improved winter demand may 7.0 Trajectory of Real GDP growth in Key Economies (y-o-y%) interest rates, after raising
manufacturing sector activity. keep the prices elevated in 6.3
China 3.0 5.2 4.5 The J.P Morgan Global the near term despite global 6.0 POLICY RATES ARE rates to a 22-year high of 5.5
LIKELY TO STAY
India 7.2 6.1 6.3 Composite PMI fell to 50.6 in recessionary concerns. 5.0 HIGHER FOR LONGER per cent.
August from 51.6 in July, to 4.0
World 3.5 3.0 3.0 register its lowest reading The rate hikes in the US have
since January. The momentum 3.0 2.6 2.0 triggered outflows from many
Source: IMF World Economic Outlook, July 2023 MIXED RECOVERY 2.0 emerging markets & developing
of the services sector, With the easing of inflationary
including business activity, WITNESSED ACROSS 1.0 0.6 0.4 pressures from their peak, the economies and resulted in
new orders and employment MAJOR ECONOMIES higher bond yield as well as a
The above table indicates that 2024. Another positive is that slowed in August, as a result 0.0 US Eurozone UK Japan China central banks across the globe strong dollar.
the advanced economies Asia is expected to of which the J.P Morgan As the central banks across have somewhat scaled down
would experience a marked contribute about 70 per cent Global Services PMI the world continue to hike Q22022 Q32022 Q42022 Q12023 Q22023 the pace of monetary The Bank of England, too, has
slowdown as growth is of global growth this year, moderated to 51.1 in August interest rates in their fight Source: National Sources tightening. However, the raised rates for the fourteenth
expected to fall from 2.7 per boosted by reopening of from 52.7 in July. On the against inflation, many global continued interest rate consecutive time to 5.25 per
cent in 2022 to 1.5 per cent China and strong momentum other hand, the J.P Morgan economies have been levels but remains well above increases, in order to bring the cent in August 2023, bringing
this year and would remain of the Indian economy. Manufacturing PMI stood at witnessing a slowdown in INFLATION SEEN TO BE the central banks’ target. IMF inflation print within target interest rates to their highest
subdued at 1.4 per cent in 49 in August, with operating growth. With fairly resilient MODERATING THOUGH range of the central banks, are level since February 2008. The
2024. By contrast, growth in The World Bank, too, in its conditions decelerating due labor markets, the US REMAINS ABOVE expects global inflation to fall likely to keep the borrowing
emerging markets and latest Global Economic to acute weakness in the Euro economy has been able to TARGET RANGE from 8.7 per cent in 2022 to costs higher for longer than bank also highlighted that some
developing economies is Prospects Report, projects Area and signs of a slowdown sustain its economic growth 6.8 per cent in 2023 and to expected by the investors, key indicators, notably wage
expected to remain almost the global economy to slow in China. in the second quarter of 2023 5.2 per cent in 2024, on the businesses, and households. growth, suggest that some of
the same with year-on-year significantly this year, with as it grew by 2.6 per cent on Inflation, which emerged as a back of lower commodity the risks from more persistent
growth at 4.0 per cent in weakness continuing in 2024. Global commodity prices the back of stronger business big risk post the Russia’s prices. However, core inflation, The US Fed, in its latest inflationary pressures may have
2022 and 2023 and rising According to the Bank, the have also been on a rise in investments. invasion of Ukraine last year, which removes food and fuel monetary policy meeting begun to crystallize.
marginally to 4.1 per cent in global economy is expected recent months. Brent crude has started exhibiting some prices, is expected to decline maintained a status quo on its
softening from the elevated
more gradually.
28 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 29
QUARTERLY JOURNAL OF ECONOMICS
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