In 2022, the world economy was hammered by a succession of severe and mutually reinforcing shocks, including the COVID-19 pandemic, the conflict in Ukraine and the ensuing food and energy problems, skyrocketing inflation, debt tightening, and the climate disaster. In this context, global output growth is expected to slow from an estimated 3.0 percent in 2022 to 1.9 percent in 2023, representing one of the lowest rates in recent decades, according to the United Nations World Economic Situation and Prospects (WESP) 2023, which was released today.
The report paints a bleak and uncertain economic picture for the near future. Global GDP is expected to moderately accelerate to 2.7% in 2024, as some of the barriers begin to fade.
However, the pace and timing of future monetary tightening, the length and repercussions of the war in Ukraine, and the possibility of further supply-chain disruptions all play a role.
The bleak global economic outlook also jeopardises achievement of the 17 Sustainable Development Goals (SDGs), with the 2023 SDG Summit in September marking the midpoint of the 2030 Agenda’s implementation.
“This is not the moment for short-term thinking or knee-jerk budgetary austerity that exacerbates inequality, causes misery and could push the SDGs more out of reach. “These exceptional times necessitate unprecedented action,” said UN Secretary-General António Guterres. “This action comprises a transformative SDG stimulus package resulting from the combined and coordinated efforts of all stakeholders,” he continued.
Both wealthy and developing economies face bleak economic prospects.
The present downturn has hampered the speed of economic recovery from the COVID-19 crisis, threatening several nations — both developed and developing — with recession in 2023 as a result of rising inflation, aggressive monetary tightening, and heightened uncertainties. Growth momentum of the United States, the European Union, and other developed nations dropped dramatically in 2022, negatively impacting the rest of the global economy through a variety of routes.
Tightening global financial conditions, along with a high dollar, increased developing countries’ fiscal and debt vulnerabilities. Since late 2021, more than 85% of central banks around the world have tightened monetary policy and raised interest rates in fast succession to manage inflationary pressures and avoid a recession. Global inflation, which hit a multi-decade high of almost 9% in 2022, is expected to moderate but remain high in 2023, at 6.5 percent.
Slower job growth and growing poverty
In 2022, most emerging countries saw a slower job recovery and continue to face significant employment slack. Disproportionate losses in women’s employment during the pandemic’s initial phase have not been fully reversed, with advances owing primarily to a resurgence in informal jobs.
Slower growth, along with rising inflation and expanding debt vulnerabilities, threatens to undermine hard-won successes in sustainable development, exacerbating the already negative effects of the current crises, according to the paper. Already in 2022, the number of persons experiencing severe food insecurity had more than doubled compared to 2019. A prolonged period of economic weakness and poor income development would not only impede poverty eradication but would also limit governments’ ability to invest more extensively in the SDGs.
“The current difficulties are hurting the most vulnerable the hardest – frequently through no fault of their own. “The international community must increase its collective efforts to alleviate human suffering and ensure an inclusive and sustainable future for all,” said Li Junhua, United Nations Under-Secretary-General for Economic and Social Affairs.
The research urges governments to avoid fiscal austerity, which would slow growth while disproportionately harming the most vulnerable populations, impede progress toward gender equality, and hamper development potential across generations. It suggests reallocating and reprioritizing public spending through direct policy interventions that will create jobs and rev up growth. This will necessitate the expansion of social safety systems, as well as the provision of ongoing assistance through targeted and temporary subsidies, cash transfers, and utility bill discounts, which can be supplemented with reductions in consumption taxes or custom charges.
Strategic public investments in education, health, digital infrastructure, new technologies, and climate change mitigation and adaptation can provide huge social benefits while also accelerating productivity growth and strengthening resilience to economic, social, and environmental shocks.
Additional SDG financial requirements in developing nations vary depending on source, but are expected to be in the trillions of dollars per year. A stronger international commitment is urgently required to increase access to emergency financial assistance, restructure and decrease debt loads in poor countries, and scale up SDG finance.
