Analysis and Prospects of the World Economic Situation 2023-2024

At present, the growth momentum of the world economy is clearly insufficient, and faced with many unstable, uncertain and unpredictable factors, the world economy is generally on a downward path. From the perspective of trend changes, the world economy will still be in the process of reshaping its growth momentum in 2024, with positive factors accumulating but downward pressure remaining.

Review of the Overall Situation of the World Economy in 2023

The year 2023 was a year of turbulence, polarization and change. Under the intertwined influence of various factors, the downward trend of the world economy has become an expected trend. The International Monetary Fund (IMF) estimates that the world economic growth rate to be 3.0% in 2023, a decline of 0.5% from 2022. During the same period, the developed economies are under greater economic downward pressure, with a growth rate of only 1.5%, down 1.1% from 2022. Thanks to the boosting effect of the Chinese economy, the economic growth of emerging markets and developing economies slowed down to a lesser extent, with a growth rate of 4.0%, down by only 0.1% from 2022.

In terms of employment and prices, the global situation has improved in 2023 compared to 2022. In May 2023, the International Labour Organization (ILO) revised its estimate of the global unemployed population significantly, with the global unemployed population in 2022 revised downward from the previous estimate of 205 million to 192 million; it is projected to fall further to 191 million in 2023, with unemployment rate of 5.3%, a decrease of 0.1% compared to 2022. The pace of global employment recovery in the aftermath of the COVID pandemic has been faster than that of the 2008 international financial crisis. Unemployment rates in all but low-income countries have generally declined to pre-pandemic levels, and in some countries are even at record lows for the past several decades. Against the backdrop of continued monetary policy tightening in major advanced economies, the grim situation of global inflation has eased significantly. The IMF estimates that the global average inflation rate will be 6.9% in 2023, a decline of 1.8% compared to 2022, and the year-end inflation rate will be 6.4%, a decline of 2.5% compared to 2022. The decline in global commodity prices is one of the main factors driving the fall in prices. IMF data show that the global commodity price index stood at 164.45 in November 2023, down 14.4% from the year earlier, and down 32.0% from the high in August of the previous year. However, the current level of inflation in major developed economies is still well above central bank inflation targets, which means that monetary policy in major developed economies such as the United States is working but with limited effect.

Against the backdrop of economic downturn and monetary policy tightening, global debt risk is accumulating at a high level. Since 2023, global debt levels have continued to climb, especially in major developed countries such as the United States. The scale of debt has repeatedly reached record highs. In September 2023, a report released by the Institute of International Finance (IIF) showed that global debt increased to a record $307 trillion in the second quarter of 2023, with the ratio of global debt to GDP increasing from $4.5 trillion to $6.5 trillion. The ratio rose for the second consecutive quarter to 336%. Notably, this uptick comes after seven consecutive quarters of declining debt ratios. More than 80% of new debt in the first half of 2023 came from developed countries, with the largest increases in the United States, Japan, the United Kingdom, and France. Under the impact of the continued tightening of monetary policy in developed economies and other factors, many emerging market countries have experienced capital outflows and currency depreciation, and debt risk has risen sharply. Since 2023, some emerging market countries with a higher proportion of external debt and more fragile economic fundamentals and financial systems have faced a higher risk of debt default, and some countries have even experienced debt crises. If inflationary pressures continue to increase, central banks in advanced economies may raise interest rates further, which would further push up global debt risks and trigger a financial crisis.

Despite the gradual receding of the impact of the pandemic on global trade and investment activities, international trade and investment growth is still under considerable downward pressure. In October 2023, the World Trade Organization (WTO) released forecasts showing that global trade in goods to grow by 0.8% year-on-year in 2023, a significant downward revision from the April forecast of 1.7%. The WTO also warned that signs of fragmentation in global supply chains are beginning to emerge and will continue to pose a threat to global trade. The situation for global investment growth is even less optimistic. In January 2024, the United Nations Conference on Trade and Development (UNCTAD) released its Global Investment Trends Observatory, which showed that global foreign direct investment (FDI) fell by 12% year-on-year in 2022 to $1.3 trillion; global FDI in 2023 is estimated to be $1.37 trillion, an increase of 3% from 2022. Despite this better-than-expected result, economic uncertainty and high interest rates had a significant negative impact on global investment.