World Economy on Slippery Slope: World Economic Situation & Prospect Report

Addis Ababa (ENA) February 2/2023 Multiple shocks have put the world economy on a slippery slope, according to the 2023 World Economic Situation and Prospect report.

According to the report, shocks such as the impacts of COVID 19 pandemic, the war in Ukraine, surging inflation across the world, climate crisis, and the monetary policy responses to inflation put the global economy in this situation.

Against this backdrop, world output growth is projected to decelerate from an estimated 3 percent in 2022 to only 1.9 percent in 2023, marking one of the lowest growth rates in recent decades, it added.

The economic outlook for 2023 and 2024 remains notably uncertain, the report stated, adding that it is highly susceptible to the pace and sequence of further monetary tightening, the course and consequences of the war in Ukraine and other geopolitical tensions as well as the possibility of further supply chain disruptions.

Slow global growth in 2023 would mean that output losses compared with the pre-COVID 19 growth trajectory will further increase, especially in developing countries.

Growth in GDP of developed economies is forecast to drop from 2.6 in 2022 to 0.4 in 2023 and developing economies will remain at 3.9 percent, the report revealed.

Economic growth in Africa is estimated to weaken to 3.8 percent in 2023 from 4.1 percent in 2022 while economic activity levels remain below the pre-pandemic trend.

Launching the 2023 World Economic Situation and Prospect today, UNECA Macroeconomics and Governance Division Director Adam Elhiraika said that African countries need to transform their economies.

“Transformation cannot be done immediately but it is a must. If we are serious about it and start the process of transformation and diversification 5 to 10 years down the line we will see that Africa is improving its economic performance and addressing its socio-economic challenges,” he emphasized.

Global commodity price shocks have reverberated through African economies, especially through rising energy, fertilizer and food prices, the report stated, adding that these have translated into increasing import bills for most net food and oil importers and shrinking GDP.

Meanwhile, projected slower growth due to the war in Ukraine and increased inflationary pressures pose continued significant repercussions for the poor.

The share of African countries experiencing double-digit inflation rocketed to 40 percent in 2022, driven mainly by supply chain disruptions and the fallout from the war in Ukraine, which made essential food and energy items more expensive.

Thus, about two thirds of African countries increased domestic policy interest rates in 2022 to combat inflation and exchange rate pressure.

The report underscored that international cooperation has never been more important than now to face multiple global crises and bring the world back on track to achieve the SDGs.